Rachel Reeves announces huge 10p change for petrol and diesel drivers | Personal Finance | Finance

Rachel Reeves has confirmed a new 10p per mile increase that will be backdated to April 2026. The Chancellor confirmed the increase alongside a 12-month road tax holiday for heavy goods vehicles (HGVs).

Reeves told the Commons: “For hauliers, the Government is granting a 12-month road tax holiday for HGVs, saving the typical heavy lorry up to £912. To support farmers and the rail freight industry, I have decided to cut duty on red diesel by over a third until the end of this year. And having heard from (Labour former minister Jim McMahon) and the trade union Unison, I can today announce a 10p per mile increase in tax-free mileage rates backdated to April 2026 benefiting those who need to drive for work, from care workers to plumbers.”

A government statement said: “On average, this will save around £120 for a worker doing 6,000 business miles, using their own vehicle for work.

“This builds on the Chancellor’s announcement yesterday that she is extending the fuel duty cut until the end of the year – saving motorists £120 since 2025.”

Reeves is under pressure to freeze fuel duty until the next election after being presented with a 150,000-signature petition. Sir Keir Starmer yesterday bowed to pressure and U-turned, announcing that plans to start increasing fuel duty in September have been axed until the end of the year.

But campaigners warn much bolder action is needed and want the duty “slashed”.

Howard Cox, the founder of FairFuelUK, said he was “delighted” that fuel duty will remain frozen for the rest of the year, but called for a tax cut.

Cox said: “With a shedload of new VAT pouring into the Treasury, there is ample room to cut duty by 20p. The positive impact on the economy would be monumental.”

Jack Cousens, head of roads policy at the AA, looked ahead to the autumn Budget, saying: “Drivers will find out in the autumn how and when the 5p will be added back onto the pumps.”

Claiming the Treasury has been enriched by higher prices, he said: “Current petrol pump prices are 26p a litre higher than a year ago, generating 4.3p a litre extra in VAT.”

Shadow Chancellor Sir Mel Stride said: “Labour’s fuel tax hike would have hurt businesses and hammered hardworking families already stretched to breaking point.

“For months, I’ve been calling for Reeves to axe her fuel tax hike. After Conservative pressure, Reeves has finally been forced into a U-turn.

“Under the Conservatives, fuel duty was frozen or cut for 14 years in a row. Labour wanted to put it up during a cost of living crisis. That tells you everything.”