Chancellor Rachel Reeves has hinted at introducing major changes to mileage rates for company car owners, in a move that could save drivers money over the course of a year.
Overall running costs of vehicles have increased dramatically over the last few years, thanks to fluctuating fuel prices, huge insurance changes and the cost of living crisis.
Labour MP Jim McMahon questioned the Chancellor whether the Government was looking at changing the tax-free amount drivers can claim back in expenses for mileage.
He highlighted that the current rate of 45p per mile was introduced in the 2011-2012 tax year, which applies to the first 10,000 business miles in the tax year.
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This applies to cars and vans, and falls to 25p for each business mile over 10,000. Motorcycles are charged 24p, while bicycles are rated at 20p per mile.
However, Mr McMahon, who is a former Labour minister, suggested that the current cost to run a car works out to around 67p per mile.
The Chancellor acknowledged that the Approved Mileage Allowance Payment Rates had not changed for 15 years.
She also noted that motoring costs have increased "significantly", adding that it was an important issue for those who need to claim motoring expenses.
Chancellor Rachel Reeves hinted that changes could be made to annual mileage rates
|PA/GETTY
"We're therefore looking at the issue and will consider the matter further in the usual way as part of a future fiscal event," the Labour MP for Leeds West and Pudsey said.
She explained that the Government was already taking steps to help drivers with rising motoring costs through the extension of the fuel duty freeze.
The 5p per litre cut to fuel duty, which was introduced in 2022 after Russia invaded Ukraine, has been extended for a further five months.
While the 5p cut will be reversed over the next year, Rachel Reeves confirmed in her Autumn Budget that the planned inflation-based increase this year would be axed.
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The 5p fuel duty cut was introduced in the aftermath of Russia's invasion of Ukraine in 2022 | PAIn response to Ms Reeves, Mr McMahon, who represents Oldham West, Chadderton and Royton, welcomed the potential changes.
He said: "The 45-pence a mile rate set 15 years ago is nowhere near the true costs of running a vehicle today, recently assessed at 67-pence a mile, that was before fuel costs rocketed in the last week."
Rachel Reeves replied: "This is one area that I will be keeping a very close interest in."
Following American and Israeli airstrikes on Iran over the last few weeks, the global price of oil has skyrocketed to almost $120 (£89), forcing up prices of petrol and diesel across the UK.
The price of Brent Crude oil has fallen over the last 24 hours, although it remains higher than in previous days and weeks
| OILPRICE.COMThe latest data from RAC Fuel Watch shows that a litre of petrol costs an average of 137.78p, while drivers are paying 151.81p, with prices likely to rise further.
Experts have called on the Government to introduce urgent new rules to protect petrol and diesel drivers at the pumps following the spike in oil costs.
The Chancellor said more than 90 per cent of forecourts across the UK have signed up to the Fuel Finder scheme, which displays the cheapest places to buy fuel around the country.
Modelling from the Government estimates that drivers could save between one and six pence per litre when using the tool.