Martin Lewis on 55p-per-mile tax break for millions of drivers

Workers who use their own cars for their jobs could be missing out on hundreds of pounds after a major change to mileage rates – and Martin Lewis says it is one of the most overlooked money-saving measures this year.

The MoneySavingExpert highlighted a little-known rule that could boost payments for millions of employees who drive between workplaces, visit clients or travel as part of their job.

From April, the Government increased the approved mileage allowance for cars and vans from 45p to 55p per mile for the first 10,000 business miles driven each tax year – the first rise in more than a decade.

The change does not apply to ordinary commuting between home and work. Instead, it affects workers who regularly travel for business, including care workers visiting clients, tradespeople, sales staff, community nurses, engineers and anyone required to drive between different locations during the working day.

Speaking on BBC Radio 5 Live, Martin Lewis said: “The big one that I think is going to be under-covered, but is actually really important, is the increase in the mileage allowance for people who drive as part of their work.

“This has been frozen at 45p since, I think, 2011, so the increase from 45p to 55p for the first 10,000 miles that you drive is really important.”

The new rate means employers can reimburse staff up to 55p a mile without the payment being subject to tax or National Insurance.

But Mr Lewis warned there is another part of the rule many workers may not know about.

If an employer pays less than the approved rate, employees may be able to claim tax relief on the difference through HMRC.

He explained: “If your employer doesn’t give you the full amount of the mileage allowance – let’s imagine they give you 30p and the allowance is 55p – you can claim tax back on that 25p per mile that you drive as part of your work, not commuting.”

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And if an employer pays nothing at all, workers could claim tax relief based on the full 55p rate.

After the first 10,000 business miles, the approved rate falls to 25p per mile.

The rules also apply to self-employed people using their own vehicles for business purposes, although mileage rates for motorbikes and bicycles remain unchanged at 24p and 20p per mile respectively.

For workers covering thousands of miles each year, the change could mean significantly more money back – but only if they know to check what their employer pays and whether they are eligible to make a claim.