The Great British Summer Saving Scheme (business mileage updates)

Chancellor Rachel Reeves has unveiled a package of time-limited summer support measures alongside some significant, long-awaited structural tax changes. Dubbed the ‘Great British Summer Saving Scheme’, the announcement primarily aims to ease the burden on businesses and families dealing with rising costs.

Here is our breakdown of the key announcements, what they mean for your business, and a deep dive into the long-overdue 10p increase to business mileage allowances.

The VAT cut and summer support package

In a bid to support the hospitality and tourism sectors, the government is introducing temporary VAT cuts for family-focused expenditures:

• 5% VAT on children’s meals: Starting 25 June 2026 (aligned with the start of Scottish school holidays) and running until 1 September 2026, VAT on children’s meals is slashed to 5%. This applies strictly to meals held out for sale exclusively for children and consumed on-premises at restaurants, cafes, hotels, and similar catering establishments.
• 5% VAT on attractions: The reduced 5% rate will also apply to children’s tickets for attractions, including theme parks, cinemas, zoos, fairs, and soft play areas.
• Free August bus travel: In addition to the VAT cuts, bus travel across England will be entirely free for children aged 5 to 15 throughout August, provided local bus operators opt into the scheme.

Because this is backdated to the start of the current tax year (6 April 2026), businesses should review any mileage claims processed over the last few weeks to ensure employees are reimbursed accurately under the new thresholds.

Other notable tax changes

To fund these temporary reliefs, the Chancellor targeted oil and gas multinationals benefiting from soaring global energy prices.

• Foreign branch exemption removed: From 1 September 2026, UK-resident oil and gas companies will lose their corporation tax exemption on activities conducted through foreign permanent establishments (PEs). This is designed to halt the shifting of UK energy trading profits to lower-tax jurisdictions.
• Targeted transport support: The government confirmed a continuation of the 5p fuel duty freeze. Additionally, hauliers will receive a 12-month road tax holiday for HGVs (saving up to £912 per lorry), and red diesel duty will be slashed by over a third until the end of the year to support farmers and rail freight.

The new mileage rates break down

For the first time in 15 years, the government has finally budged on Approved Mileage Allowance Payments (AMAPs). Frozen since April 2011, the rates have been heavily criticised as outdated relative to skyrocketing fuel and vehicle maintenance costs.

Driven by the pressures of rising fuel costs, the Chancellor announced a 10p per mile increase. Crucially, this change is backdated to 6 April 2026 for the 2026/27 tax year.

If you are a business owner or an employee using your own personal vehicle for business journeys, the updated tax-free thresholds are as follows:

Important limitations to note

• The 10,000-mile cap remains firmly in place. Once an individual exceeds 10,000 business miles in the tax year, the tax-free rate drops back down to the historical 25p per mile.
• Company cars are excluded for now. If your employees drive company-owned vehicles but pay for their own fuel, these changes do not yet apply. HMRC has not yet confirmed any adjustments to the Advisory Fuel Rates (AFRs) for company cars in relation to this announcement.