Researched and written by Marina Jahan · Rates verified by Shamayun Chowdhury (ACMA) · HMRC figures effective 1 September 2026 · Updated October 2026
A sales manager drives her company car around 1,000 business miles a month, visiting customers across the Midlands. She pays for the fuel at the pump, then claims it back. How much can her employer repay without creating a tax bill for either of them? HMRC answers that question every three months with its advisory fuel rates: a set of pence-per-mile figures for company cars, split by engine size and fuel type.
Below you’ll find the new HMRC car fuel costs that apply from 1 September 2026, how they compare with the previous quarter, and how employers, directors and company car drivers should use them. We also cover the fuel benefit charge, reclaiming VAT on mileage and what happens when the rates change again in December.
Quick answer
From 1 September 2026, HMRC’s advisory fuel rates for company cars are 14p, 17p or 27p a mile for petrol, 15p, 16p or 22p for diesel and 11p, 13p or 20p for LPG, depending on engine size. Fully electric cars use 7p a mile for home charging and 15p for public charging. Reimbursing business miles at or below these rates triggers no tax or National Insurance. The next review is due on 1 December 2026.
New HMRC Car Fuel Costs from 1 September 2026
These HMRC advisory fuel rates were published on 21 August 2026. They apply to journeys made on or after 1 September 2026 and stay in place until the next quarterly update.
| Engine size | Petrol | Diesel | LPG |
|---|---|---|---|
| Small: petrol or LPG up to 1400cc, diesel up to 1600cc | 14p | 15p | 11p |
| Medium: petrol or LPG 1401cc to 2000cc, diesel 1601cc to 2000cc | 17p | 16p | 13p |
| Large: over 2000cc | 27p | 22p | 20p |
Fully electric company cars: 7p a mile when charged at home and 15p a mile when charged on a public network. These are known as the advisory electricity rates. Hybrids don’t get an electric rate of their own; HMRC treats them as petrol or diesel cars, so use the figure for the engine.
What changed from the June rates
The September update was a small one. Three figures fell by a penny, one rose by a penny, and the rest stayed put:
| Category | 1 June to 31 August 2026 | From 1 September 2026 |
|---|---|---|
| Diesel, 1601cc to 2000cc | 17p | 16p |
| Diesel, over 2000cc | 23p | 22p |
| Petrol, over 2000cc | 26p | 27p |
| LPG, over 2000cc | 21p | 20p |
Rather than headlines saying HMRC increases advisory fuel rates for company cars across the board, the reality is a mixed picture that tracks pump prices. Drivers of large petrol cars gain a penny a mile; drivers of mid-sized and large diesels, and large LPG cars, lose one. Electric rates didn’t move. If your payroll or expenses software holds the rates as fixed values, check that someone has updated them, because HMRC’s updated advisory fuel rates for company drivers don’t flow into systems automatically.
What Fuel Advisory Rates Are Used For
The new HMRC car fuel costs apply to one type of vehicle only: a car the business provides. They cover fuel only, not wear and tear, insurance or servicing, because the company is already paying those bills. In practice, HMRC fuel advisory rates come up in two situations that run in opposite directions.
| Situation | Who pays whom | Tax result at the advisory rate |
|---|---|---|
| Driver buys fuel personally, then claims business miles | Employer repays the driver | No taxable profit and no Class 1A National Insurance |
| Company fuel card covers all fuel, including private trips | Driver repays the employer for private miles | No fuel benefit charge, provided private mileage is recorded accurately |
If the car belongs to the employee rather than the business, these figures don’t apply at all. Privately owned cars come under the approved mileage allowance instead: up to 10,000 business miles a year at 45p, then 25p per mile beyond that. Those figures are designed to cover every running cost, not only fuel.
Paying more than the advisory rate
Nothing stops an employer from being more generous, but the excess has a cost. Where a company pays, say, 20p a mile to someone driving a mid-sized diesel (advisory rate 16p), the extra 4p a mile is treated as taxable pay and counts as earnings for Class 1 National Insurance, unless the employer can show that the car’s real fuel cost per mile is higher. For a driver doing 12,000 business miles, that’s £480 a year running through payroll rather than being paid tax-free.
Using your own rate instead
The figures are guidance rather than law. HMRC accepts a business using its own rate if it can back it up, for example because its cars are more fuel efficient than average or its drivers face higher fuel prices. That means keeping evidence: fuel receipts, mileage records and a calculation showing the cost per mile. For most small companies, sticking with the published rates is simpler and avoids any argument.
Paying less than the advisory rate
An employer can also choose to repay less. Because the car isn’t the driver’s own, there’s no Mileage Allowance Relief to claim on the shortfall. The driver simply absorbs the difference, so most employers pay the full rate.
Electric Company Cars: Home and Public Charging Rates
HMRC now publishes two figures for fully electric company cars: a lower rate for charging at home and a higher one for public chargepoints. Under the new HMRC car fuel costs for this quarter, they stand at 7p and 15p a mile. The gap reflects the price difference between a domestic electricity tariff and a roadside rapid charger.
Many drivers use both. HMRC allows mileage to be divided between the two rates using a method that’s fair and reasonable, such as the share of charging done at each. A simple monthly log of charging sessions is usually enough.
Example: splitting electric mileage
An employee drives 1,500 business miles in a quarter in an electric company car. Her charging log shows roughly 60% of the energy came from home and 40% from public chargers. Her employer can repay 900 miles × 7p = £63 plus 600 miles × 15p = £90, a total of £153, without any tax or NI. Figures are illustrative.
Plug-in hybrids sit outside this. Even when part of a journey runs on battery power, the employer applies the petrol or diesel figure for the engine size.
New HMRC Car Fuel Costs and the Fuel Benefit Charge
Searches for “HMRC fuel charges 2026” often come from people worried about a different tax: the car fuel benefit charge. It applies when a company pays for fuel that a driver uses privately, and that includes the daily commute. Unlike the pence-per-mile figures, this charge has nothing to do with how many private miles are driven. One litre of company-funded private fuel is enough to trigger the full amount for the year.
The calculation is short. Take HMRC’s fixed figure for the tax year, which is £29,200 for 2026/27, and multiply it by the same percentage used for the car’s company car benefit. That percentage depends on the car’s CO₂ emissions and fuel type. The result is added to the driver’s taxable income, and the employer pays Class 1A National Insurance on it at 15%.
How to avoid it
The charge disappears completely if the driver repays the business for every private mile. The advisory fuel rates are the accepted way to price that repayment. To work, three things must be in place:
- An accurate record of private journeys, kept alongside business mileage.
- Repayment at the advisory rate for the car (or at the actual cost, if higher).
- Payment made by 6 July after the end of the tax year.
Fully electric company cars don’t face this charge at all, because HMRC doesn’t treat electricity as car fuel for benefit purposes.
Worked example: a director’s diesel company car
Daniel is a higher rate taxpayer and director of his own limited company. His company car is a 1.8 litre diesel with an appropriate percentage of 25%. In 2026/27 he drives 8,000 business miles and 4,000 private miles, all on a company fuel card. Assume the 16p rate applies all year.
| Option | Calculation | Cost |
|---|---|---|
| A. Company pays all fuel, nothing repaid | Fuel benefit £29,200 × 25% = £7,300. Daniel’s tax at 40% = £2,920; company’s Class 1A at 15% = £1,095 | £4,015 |
| B. Daniel repays private fuel at the advisory rate | 4,000 private miles × 16p | £640 |
Repaying £640 removes a combined tax and NI cost of £4,015. Option A only makes sense for drivers covering very high private mileage in a car with a low appropriate percentage. Figures are illustrative; real rates change quarterly and percentages vary by car.
Reclaiming VAT on Advisory Fuel Rate Mileage
A VAT-registered business can recover VAT on the fuel part of mileage it pays out. Here the advisory figures do double duty: they set the tax-free reimbursement and also form the basis for the VAT claim, which is why some people search for HMRC’s new VAT fuel rates each quarter. There’s no separate VAT table: you simply take the VAT out of the new HMRC car fuel costs paid per mile.
Since the advisory rate includes VAT at 20%, the VAT element is one-sixth of the amount paid. Suppose Daniel bought his own fuel instead and the company repaid his 8,000 business miles at 16p. It would pay him £1,280 and could reclaim £1,280 ÷ 6 = £213.33 on its VAT return.
The claim must be backed by VAT receipts for fuel bought in the period, covering at least the fuel used for the business miles. Without receipts, HMRC can refuse the VAT even though the mileage payment itself is fine. Where a business pays for all fuel, including private use, the VAT rules switch to a different method, the fuel scale charge, which a business can use in place of tracking private miles. Returns showing these claims are submitted digitally under Making Tax Digital for VAT rules.
How New HMRC Car Fuel Costs Change Each Quarter
HMRC looks at the rates four times a year, with changes taking effect on 1 March, 1 June, 1 September and 1 December. New figures are normally posted on GOV.UK a week or two beforehand, so the next set should appear in late November 2026. Older tables, such as the advisory fuel rates from December 2025, remain available through GOV.UK and the National Archives if you need to check a past claim.
There’s a built-in buffer. After a change, businesses may keep using the previous quarter’s rates for up to one month. Someone submitting September mileage in early October, for example, can still be paid at the June figures. After that grace month, the new rates should be used.
Accountant’s view
With owner-managed companies, three slips come up again and again: no mileage log at all, the wrong engine band applied (a 1.6 litre petrol is a 17p car, not 14p), and private fuel repaid months after the 6 July deadline. Each one can turn a tax-free payment into a benefit charge. Put the current rates in your expenses software, keep a simple log, and settle private fuel before the year closes.
Advisory Fuel Rates: Your Questions
Can I use these rates for my own car?
No. They’re for company cars only. Employees using their own vehicle are paid under the approved mileage allowance instead.
Does a plug-in hybrid qualify for the electric rate?
No. HMRC classes hybrids as petrol or diesel, so use the rate for the engine size.
Is a lower rate allowed?
Yes. An employer can pay less, but the driver can’t claim tax relief on the difference for a company car.
When are the next rates out?
The next change to the new HMRC car fuel costs is due on 1 December 2026, with figures usually published in the second half of November.
Do business mileage payments go on a P11D?
Not when they stay within the advisory rate for business journeys, because there’s no taxable profit to report. Amounts above the rate without evidence are a different matter and go through payroll.
Can a sole trader use advisory fuel rates?
Not really. Sole traders either claim actual vehicle costs or use simplified expenses at 45p and 25p a mile for cars. Advisory rates are an employer–employee tool.
What about company vans?
The published rates are for cars. For vans, reimburse business fuel at actual cost with evidence. Private fuel in a company van carries a fixed van fuel benefit of £798 for 2026/27.
What counts as proof of business mileage?
A log showing the date, start and end points, reason for the trip and miles driven. Mileage apps that record journeys automatically are fine if the purpose of each trip is noted.
Final Verdict: Using the New HMRC Car Fuel Costs Correctly
From 1 September 2026, the new HMRC car fuel costs range from 11p to 27p a mile for fuelled cars and 7p or 15p for electric ones. Pay business miles at or below those figures and neither the driver nor the company owes tax or NI on them. Ask drivers to repay private fuel at the same rates by 6 July to sidestep the fuel benefit charge, keep fuel receipts to reclaim the VAT, and diary 1 December for the next update.
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Our checks on this page
- Rate tables matched line by line to GOV.UK’s advisory fuel rates page (updated 21 August 2026).
- Fuel benefit multiplier and the 6 July make-good date confirmed against HMRC publications.
- All worked examples recalculated; reviewed by an ACMA-qualified accountant.
Official sources (checked 16 October 2026)