HMRC has removed home-working tax relief, are your expense policies ready?
On 21 May 2026, Chancellor Rachel Reeves announced a targeted package of support measures aimed at mitigating rising costs for both households and businesses, particularly driven by higher global energy and fuel prices.The measures are not a full fiscal event but a focused intervention (“Great British Summer Savings”) combining tax, transport and sector‑specific support.
1. Key measures affecting individuals
Mileage allowance increase
- 10p increase to Approved Mileage Allowance Payments
- Now 55p per mile (first 10,000 miles), 25p thereafter
- Backdated to 6 April 2026
Impact:
- Immediate tax‑efficient support for employees and the self‑employed using personal vehicles
- Employers may need to review reimbursement policies and consider backdated adjustments
Temporary VAT cut (summer period)
- VAT reduced from 20% to 5% on:
- Attractions (theme parks, zoos, museums, etc.)
- Children’s cinema/theatre tickets
- Children’s meals in restaurants
- Applies 25 June – 1 September 2026
Impact:
- Intended to boost disposable income and consumer spending
- Potential demand uplift for hospitality, leisure and tourism sectors
Cost relief for families
- Free bus travel for under‑16s in England (August)
Food price support
- Tariffs suspended on 100+ food products
- Government expectation that savings are passed on to consumers
2. Transport and fuel support (households & businesses)
Fuel duty
- Fuel duty increase cancelled / frozen for 2026
- Existing 5p cut maintained
Red diesel
- Duty cut by over one‑third until year‑end
Haulage sector
- 12‑month road tax holiday for HGVs
- Saving up to c. £600–£912 per vehicle
Impact:
- Reduces operating costs across logistics, agriculture and transport‑reliant businesses
- Helps mitigate inflationary pressure from fuel costs
3. Business and sector‑specific support
Industrial support funds
- £350m Critical Chemicals Resilience Fund
- £120m support for ceramics sector
Impact:
- Targeted relief for energy‑intensive industries facing cost pressures
- Aims to protect supply chains and domestic production
4. Funding and policy approach
- Package estimated at ~£1.8bn over several years
- Partly funded through increased taxation of global oil and gas firms
- Additional focus on clamping down on tax structuring to increase UK revenues
5. Key observations
For businesses
- Positive:
- Lower transport and energy‑related costs (fuel duty freeze, red diesel cuts)
- Increased consumer demand expected in leisure/hospitality sectors
- Action points:
- Review mileage reimbursement policies
- Update systems for temporary VAT rate changes
- Assess impact on pricing and demand where relevant
For individuals / owner‑managed businesses
- Increased mileage relief provides meaningful tax‑efficient support
- Short‑term reductions in discretionary spending costs (travel, leisure, food)
6. Notable omissions
- No direct new support for household energy bills, despite ongoing pressure
Overall Conclusion
This is a targeted, short‑term support package focused on:
- Transport and fuel cost relief
- Boosting consumer spending over summer
- Selective industry support
Rather than broad tax cuts, the approach is surgical and temporary, aimed at cushioning immediate cost pressures while maintaining fiscal discipline.
