NHS unions have won a battle to compensate staff for rising fuel costs.
The deal will give one million staff a 10% increase in mileage allowance effective from 1st July.
Staff have been feeling the pinch with rising fuel costs and unions had warned the government that many are struggling financially to travel to and from work.
The Royal College of Nurses welcomed the agreement but are still calling plans to increase fuel costs by 2p a litre in October to be scrapped.
The agreement reached with NHS employers, which includes everyone except doctors and very senior managers, also means an increase in cycle and public transport rates.
Gill Bellord, director of pay, pensions and employment relations, at NHS Employers said: "We are now working with the trade unions to finalise the details and will advise employers as soon as these have been agreed."
Dr Peter Carter, chief executive of the RCN said: "This agreement is a step in the right direction and forms part of a bigger picture in delivering a better deal for nurses."
He added the RCN was still pushing for the annual mileage allowance payment threshold to be increased.
Spiralling costs
Earlier this month, the RCN wrote to Chancellor Alastair Darling to warn that the UK's 60,000 community nurses could not afford the extra cost of running a car.
Nursing Standard magazine said petrol costs 32% more than it did when nurses' mileage allowances last rose in 2000.
The current system of NHS reimbursement is complex, and based on the size of the car and average mileage.
"This agreement is a step in the right direction and forms part of a bigger picture in delivering a better deal for nurses"
However, an example provided by the RCN suggested that a nurse clocking up 3,500 miles a year in a 1,500cc vehicle costing £14,000 new would typically receive £1,445 a year less than that recommended by the AA.
Under the deal, the regular user rate will now be 44p, a 4p increase, and the top standard user rate will be 58.3p, an increase of 5.3p.
The passenger allowance will also increase from 2p to 5p, the cycle rate from 6.5p to 10p, and public transport rates from 23p to 24p.
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