New HMRC Fuel Charges Are Now Live: What Every Company Car Driver Must Know

HM Revenue and Customs has confirmed updated VAT road fuel scale charges that took effect from 1 May 2026 and will remain in force until 30 April 2027. If you drive a company car and your employer pays for fuel you also use privately, these figures directly affect how much VAT your business needs to account for. Getting them wrong on your VAT return could mean underpaying tax or, just as likely, overpaying and leaving money on the table.

Road fuel scale charges are fixed sums that HMRC publishes each year to cover the private use of fuel in a company vehicle. Rather than requiring businesses to track every private mile driven in every company car, HMRC allows employers to account for a fixed charge in Box 1 of their VAT return. That charge depends on the CO2 emissions of the vehicle, and the rates are revised annually to reflect current fuel costs and tax policy.

What Are VAT Road Fuel Scale Charges and Who Do They Affect

The system applies to any VAT-registered business that pays for fuel used in company cars, including for private journeys. If your employer reclaims the full VAT on company fuel but you also use that fuel for non-business driving, the scale charge is how HMRC ensures the private element does not escape VAT altogether.

Drivers and businesses have three options when it comes to company fuel VAT. First, you can reclaim the VAT in full and pay the relevant road fuel scale charge. Second, you can choose not to reclaim any fuel VAT at all. Third, you can monitor the split between business and private mileage and reclaim only the VAT on the business element. HMRC allows all three approaches, but whichever you choose must be applied consistently across an accounting period.

HMRC stated: “The VAT Road fuel scale charges are amended with effect from 1 May 2026. Businesses must use the new scales from the start of the next prescribed accounting period beginning on or after 1 May 2026. You’ll need to work out the correct road fuel charge, based on your car’s CO2 emissions, and the length of your VAT accounting period.”

The New Rates for 2026 to 2027

The rates rise in increments of 5g per kilometre of CO2 emissions, covering the full range from the cleanest petrol mild-hybrids to large diesel SUVs and luxury saloons. For a 12-month accounting period, the VAT-inclusive charges run from £657 for vehicles producing 120g/km or less of CO2 up to £2,297 for vehicles producing 225g/km or more.

At the lower end of the scale, a company car driver using a vehicle producing 125g/km faces a 12-month charge of £983, or £246 per quarter. A more typical family SUV or executive car at around 165g/km carries an annual charge of £1,508, or £377 per quarter. At 200g/km, common among larger premium cars and some plug-in hybrids, the annual charge reaches £1,971.

For businesses that account for VAT monthly, the charges are broken down accordingly. At 120g/km or less, the monthly charge is £54. At 165g/km it is £125 per month, and at 200g/km it reaches £163 per month.

For older vehicles that do not have a CO2 figure, HMRC determines the applicable band by engine size. The relevant CO2 equivalent is derived from the cylinder capacity, and once the correct band is identified, the same charge table applies.

What This Means If You Drive a Company Car

For most drivers, the practical impact of the updated scale charges depends on how your employer handles the VAT accounting. If your employer reclaims all fuel VAT and then accounts for the scale charge, the figures in the table are what they will be paying, and that is an internal business matter that does not typically result in a direct bill for the employee.

However, some employers pass the scale charge cost back to employees through salary arrangements or adjustments to their benefits package. If that applies to you, the updated rates for May 2026 to April 2027 will determine the amount. It is worth confirming with your payroll or fleet team what approach your employer takes and whether the new rates have been applied correctly from 1 May.

If you are self-employed and VAT-registered, and you use your vehicle for both business and private journeys, the same choice applies: track the mileage split carefully and reclaim only the business VAT, or apply the scale charge. For high-mileage drivers in larger vehicles, the mileage-tracking approach often produces a lower overall VAT cost and is worth the administrative effort. The updated rates are available in full on the GOV.UK website under VAT road fuel scale charges, and businesses should update their returns from the start of their next VAT accounting period.

Sources:

• HMRC confirms new VAT road charges for drivers from May 2026 (Yorkshire Live, 4 May 2026)