Why Company Car Drivers Can Now Claim Up to 26p a Mile for Fuel

Anyone who drives a company car for work should check their mileage payments, because the tax free rates employers use to reimburse fuel went up on 1 June 2026. HMRC’s quarterly Advisory Fuel Rates rose across almost every engine band, with the largest petrol and diesel engines gaining 5p a mile. A driver of a petrol company car over 2000cc can now be reimbursed 26p a mile for business travel, up from 22p, while the equivalent diesel rate climbed from 18p to 23p. The increases follow this year’s record pump prices, and for high mileage company car users they make a real difference to how much fuel money lands back in your pocket without triggering a tax charge.

The New Advisory Fuel Rates in Full

For petrol cars, the rate for engines up to 1400cc rises from 12p to 14p a mile, engines from 1401cc to 2000cc go from 14p to 17p, and engines over 2000cc jump from 22p to 26p. Diesel cars see engines up to 1600cc move from 12p to 15p, engines from 1601cc to 2000cc from 13p to 17p, and engines over 2000cc from 18p to 23p. Cars running on liquefied petroleum gas, though far rarer, also rose: up to 1400cc from 10p to 11p, 1401cc to 2000cc from 12p to 13p, and over 2000cc from 19p to 21p.

Fully electric company cars keep the dual rate system HMRC introduced in 2025, which reflects the fact that charging at home is far cheaper than using the public network. From 1 June the rate stays at 7p a mile for home charging and 15p a mile for public charging, both unchanged from the previous quarter. One useful point for electric drivers who rely on more expensive rapid chargers: if you can show your actual cost per mile is higher than the advisory rate, your employer is allowed to reimburse at that genuine cost. Hybrids do not get their own rate and are treated as either petrol or diesel depending on the engine.

AFR Versus AMAP, the Mix-Up to Avoid

The single most common error here is confusing two different schemes. Advisory Fuel Rates apply only to company cars. If you drive your own car for work, you are covered instead by the Approved Mileage Allowance Payment, known as AMAP, which is a separate and more generous figure because it is meant to cover wear, depreciation and insurance as well as fuel. The AMAP rate rose to 55p a mile for the first 10,000 business miles on 6 April 2026, up from 45p, its first increase in 15 years. That change was announced on 21 May 2026 and backdated to the start of the tax year, so it already applies.

Getting the two confused is exactly the kind of mistake HMRC looks for in an employer compliance review. Using an AFR figure to reimburse a privately owned car, or an AMAP figure for a company car, can create an unexpected tax liability. If you run a scheme, the safe approach is to confirm which category each driver falls into and apply the matching rate, with mileage records to back it up. If you are simply claiming, knowing whether your vehicle is a company car or your own car tells you which rate should appear on your expenses.

Why the Rates Went Up

HMRC calculates Advisory Fuel Rates from recent fuel prices, so the figures lag what has been happening at the pump rather than predicting it. After a year shaped by the conflict in the Middle East and oil trading back above 100 US dollars a barrel, average petrol and diesel prices climbed to their highest in more than three years, and the June rates have caught up with that reality. In effect, the rise in your mileage rate is the system acknowledging that fuel has become more expensive to buy.

Because the rates track prices, they can fall as well as rise. HMRC reviews them again on 1 September 2026, so if pump prices ease over the summer some of these figures could come back down at the next quarterly update. That cuts both ways for company car drivers: the current rates are favourable while fuel is dear, but they are not fixed, and anyone budgeting on business travel should expect them to move with the market rather than treating June’s numbers as permanent.

What Company Car Drivers and Employers Should Do

Keep accurate records that separate business mileage from private mileage, and check the AFR table at the start of each quarter rather than setting a rate once and forgetting it. If the advisory rate genuinely does not cover your fuel cost per mile, you are allowed to reimburse more, provided you can demonstrate the real cost, which is most relevant for electric drivers stuck using pricey public chargers. Employers should diarise the quarterly review dates, the next being 1 September, and update their systems promptly so reimbursements stay within the tax free limits.

Whatever the headline rate, the biggest lever on a fuel bill is still where the car is filled, since the gap between the cheapest and dearest forecourts in the same town is often several pence a litre. For electric company car drivers, the running cost picture is shifting in other ways too, from charging tariffs to tax treatment, including the way many electric models now sit relative to the expensive car supplement under the new 50,000 pound threshold. Rising public charging costs are also under scrutiny, with the government having ordered a review into public EV charging costs that could shape what the advisory electric rates look like in future quarters.

How the Rates Fit the Wider Tax Picture

Advisory Fuel Rates are only one part of the cost of running a company car. The bigger ongoing charge for most drivers is Benefit in Kind tax, the levy on the perk of having a car provided by your employer, which is based on the car’s value and its emissions. This is where electric company cars hold a striking advantage: their very low Benefit in Kind rates have made them by far the most tax efficient choice, often through a salary sacrifice scheme, which is why electric cars have spread through company fleets faster than the private market. The modest 7p and 15p electric mileage rates have to be read against that backdrop of low standing tax.

For employers, the Advisory Fuel Rates also matter for National Insurance. Reimbursing business mileage at or below the relevant rate keeps the payment free of tax and free of Class 1A National Insurance, so applying the correct figure protects the business as well as the driver. Pay above the advisory rate without evidence of a higher genuine cost, or use the wrong scheme, and a taxable benefit can arise that HMRC will look for at a compliance review. Clean mileage records that separate business from private travel are the foundation that makes the whole arrangement work.

The practical takeaway is to treat the quarterly rate as a moving figure, not a fixed one. Diarise the 1 September review, update payroll and expense systems on the day new rates take effect, and remind drivers which scheme applies to their vehicle. Company car drivers who keep half an eye on the table each quarter, and who fill up at the cheapest forecourts rather than the nearest, will consistently get the most back for their business miles while staying the right side of the rules.

For grey fleet drivers, those who use their own car for work, the headline change to remember is the separate AMAP rate rather than the AFR table. Its rise to 55p a mile for the first 10,000 business miles, the first increase in 15 years, is a meaningful uplift for anyone who racks up business mileage in a private vehicle, and it applies from the start of this tax year. Knowing which of the two schemes covers you is the first step to claiming everything you are entitled to.

Sources:

• PetrolPrices.co.uk: HMRC Raises Advisory Fuel Rates from 1 June 2026
• GB News: Driving law changes launching in June