Government Announces Changes to Mileage Rates and VAT

The government has announced an increase in the tax free mileage rate for the use of personal cars on business journeys, the first change in over 15 years. The approved rate has risen from 45p to 55p per mile for the first 10,000 business miles in a tax year, with 25p per mile continuing to apply above this threshold. This increase is backdated to 6 April 2026.

The government has also announced a temporary reduction in VAT to 5% on children’s meals and selected attractions, aimed at supporting families over the 2026 summer holidays. The measure will run from 25 June to 1 September 2026 and applies across the hospitality and leisure sectors.

Under the new rules, children’s meals served in restaurants, cafés, and similar establishments will qualify for the lower VAT rate, provided they are clearly marketed as children’s options and consumed on the premises. In addition, reduced VAT will apply to children’s tickets for a range of attractions, including cinemas, theme parks, zoos, fairs and soft play centres.

Affected businesses will need to act quickly to update their pricing systems and ensure they meet HMRC’s conditions for applying the reduced rate. Although time-limited, the initiative is designed to encourage spending and provide a seasonal boost to the hospitality and tourism sectors.