Chancellor Rachel Reeves has indicated she is taking a “close interest” in the approved mileage allowance payment (AMAP), raising the prospect of the first review of rates since 2011.
The current AMAP rate of 45p per mile was frozen 15 years ago under former chancellor George Osborne during the coalition government. Since then, motoring costs have risen sharply, with the AA estimating that if the rate had kept pace with inflation it would now stand at around 67p per mile.
The issue was raised in parliament during Treasury questions earlier this week, prompting strong contributions from MPs and an acknowledgment from ministers that the policy is overdue for review.
Parliamentary pressure builds
Jim McMahon, MP for Oldham, told the Commons that the 45p rate no longer reflects the reality of running a vehicle.
“The rate, set 15 years ago, is nowhere near the true cost of running a car today, which has recently been assessed at 67p a mile – and that was before fuel costs spiked again last week,” he said.
McMahon highlighted the impact on his constituent Gemma, a long‑serving social worker who travels around 400 miles each month for work.
“She is effectively paying over £1,000 a year just to do her job and support other people,” he added.
Chancellor signals future action
In response, the chancellor acknowledged the growing gap between mileage rates and real‑world costs.
“I recognise that motoring costs have evolved significantly, and this is an important issue for many people who claim motoring expenses,” Reeves said.
“We are therefore looking at the issue and will consider it further in the usual way as part of a future fiscal event.”
Reeves reiterated her commitment to holding only one major fiscal event each year but confirmed that the issue remains under active consideration.
“It is Treasury policy to keep all taxes under review, and this is one area that I will be keeping a very close interest in,” she said.
‘Well overdue’ review acknowledged
Treasury minister Dan Tomlinson told MPs that mileage rates have been left unchanged for too long.
“They have not been updated since 2011, and that has increased the cost of working for many people,” he said, adding that a review was “well overdue”.
Just two days later, the Treasury confirmed a new workers‑first review aimed at those who rely on their cars to do their jobs.
The review will focus on ensuring workers are not left out of pocket, with particular attention on lower‑paid employees such as care workers, who are often reimbursed at the basic AMAP rate.
Consultation planned ahead of future Budget
The Treasury has confirmed that a consultation will take place ahead of a future Budget.
As part of the process, the government said it will engage directly with individuals affected by rising travel costs to help shape the review as it develops.
Currently, HMRC’s approved mileage rates allow employees to claim 45p per mile tax‑free for the first 10,000 business miles driven in a car or van. The rate is intended to cover running costs including fuel, insurance and servicing.
However, inflation and rising motoring expenses mean the allowance no longer reflects actual costs, leaving many employees effectively subsidising their work travel.
ATT calls for legislative update
Prior to the Budget, the Association of Taxation Technicians (ATT) called on the government to increase AMAP rates set out in section 230 of the Income Tax (Earnings and Pensions) Act 2003.
The ATT said the approach should mirror HMRC’s regular reviews of advisory fuel rates for company car users.
Jon Stride, chair of the ATT’s technical steering group, said the outdated rates were placing unnecessary pressure on workers.
“These allowances are now so out of date that employees using their own vehicles for work are routinely left out of pocket,” he said.
“In addition, if employers choose to pay higher mileage rates to reflect actual costs, this can create unexpected tax and National Insurance consequences for both employers and employees.”
