HMRC Increases Advisory Fuel Rates for Petrol and Diesel Company Cars – What Drivers and Businesses Need to Know

HM Revenue & Customs (HMRC) has published updated Advisory Fuel Rates (AFRs), bringing increases for petrol and diesel company cars from 1 June 2026. The revised rates reflect rising fuel costs and are used by employers to reimburse business mileage in company vehicles or calculate repayments for private fuel use.

While these rates don’t directly affect the cost of running a privately-owned vehicle, they are important for businesses, fleet operators and company car drivers across the UK.

What are HMRC Advisory Fuel Rates?

Advisory Fuel Rates are mileage rates set by HMRC that employers can use when:

• Reimbursing employees who use a company car for business journeys.
• Calculating how much an employee should repay if the employer pays for fuel used on private journeys.

The rates are reviewed every quarter and are based on average fuel prices and vehicle efficiency. Employers can pay higher rates if they can demonstrate that the actual fuel cost is greater, although evidence must be retained.

New HMRC Fuel Rates from 1 June 2026

Petrol Company Cars

Diesel Company Cars

Every petrol and diesel category has increased, with larger engine vehicles seeing the biggest rise in reimbursement rates.

What About Hybrid and Electric Vehicles?

Hybrid vehicles continue to be treated as either petrol or diesel depending on their engine type, so there are no separate hybrid rates.

For fully electric company cars, HMRC has retained its two-tier reimbursement system:

• 7p per mile for home charging.
• 15p per mile for public charging.

These electric rates remain unchanged from the previous quarter.

What Does This Mean for Employers?

Businesses operating company cars should ensure payroll and expense systems are updated to reflect the new rates.

Using HMRC’s published AFRs helps employers reimburse staff without creating an additional tax liability, provided payments do not exceed the advisory rates. Employers may continue using the previous quarter’s rates for up to one month after the new rates take effect, allowing time to update internal systems.

Do These Rates Apply to Private Cars?

No.

A common misconception is that Advisory Fuel Rates apply to anyone claiming business mileage. They only apply to company cars.

Employees using their own car for business journeys instead claim under HMRC’s Approved Mileage Allowance Payments (AMAP), which operate under separate rules and rates.

Why the Rates Have Increased

Fuel prices remain higher than they were earlier in the year, prompting HMRC to revise reimbursement levels across petrol and diesel vehicles.

The increases are particularly noticeable for larger-engined vehicles, where reimbursement has risen by as much as 5p per mile for some diesel models. The quarterly review is intended to keep reimbursement rates broadly aligned with average fuel costs without creating a taxable benefit.

The Bottom Line

The latest HMRC Advisory Fuel Rates provide welcome increases for employees using company petrol and diesel vehicles for business travel. Employers should ensure their mileage policies and payroll systems reflect the updated figures, while company car drivers should check they are receiving the correct reimbursement.

HMRC reviews these rates every March, June, September and December, so businesses should continue to monitor future updates.

Source: HM Revenue & Customs – Advisory Fuel Rates (effective 1 June 2026).