Advisory fuel rates explained: how HMRC sets company car mileage

HMRC’s advisory fuel rates are the per-mile figures employers use to reimburse company car drivers for fuel used on business journeys, and to charge drivers back for fuel used privately. They sit alongside, but are separate from, the approved mileage rates for employees who drive their own vehicles, and the two should not be confused in a fleet expense policy.

This guide explains what the rates cover, how HMRC sets them each quarter, how the electric rates work, how they interact with approved mileage allowance payments (AMAP) and VAT, and what evidence of business mileage an employer should hold. It quotes the rates in force from 1 September 2026, as published by HMRC on 21 August 2026.

What advisory fuel rates are for

HMRC’s advisory fuel rates guidance says the rates apply only to employees using a company car, and only in two situations: reimbursing fuel for business travel, and requiring an employee to repay the cost of fuel used for private travel. The guidance says they must not be used in any other circumstances. HMRC’s Employment Income Manual at EIM25655 describes them as guidelines on fuel-only mileage rates for company cars and records that petrol and diesel rates were first published in January 2002, with LPG added in May 2002.

The rates cover fuel only. The employer already bears the cost of providing the car, so the per-mile figure is lower than the rate for an employee’s own vehicle, which also has to cover wear, insurance and depreciation.

The rates from 1 September 2026

HMRC sets separate figures for petrol, LPG and diesel by engine size, and two figures for fully electric cars. The rates below apply from 1 September 2026.

For fully electric cars, the rate is 7p per mile for home charging and 15p per mile for public charging. Hybrid cars are treated as petrol or diesel cars. Compared with the rates from 1 June 2026, the September update cut the mid-size diesel rate from 17p to 16p and changed the figures for engines over 2000cc, while the electric rates did not move.

As a worked example using those figures, 1,000 business miles in a 1,800cc diesel company car reimbursed at 16p per mile would produce a payment of £160 with no taxable profit.

How HMRC reviews advisory fuel rates each quarter

HMRC reviews the rates on 1 March, 1 June, 1 September and 1 December, and new rates apply from the first day of the review month. Employers can continue to use the previous rates for up to one month after new rates take effect, which gives payroll teams time to update expense systems. The next scheduled review after the September 2026 change is 1 December 2026, so anyone reading this after late November 2026 should check the HMRC page for newer figures.

The guidance explains the method. Petrol and diesel prices come from the Department for Energy Security and Net Zero, and LPG prices from the AA. Fuel economy figures come from manufacturers’ information weighted by annual sales to businesses, and LPG is assumed to be 20 percent less economical than petrol. The home electricity figure uses DESNZ data uprated by the Office for National Statistics consumer prices index for electricity, and the public charging rate draws on the Zapmap Price Index.

The public charging rate is relatively new. The guidance’s change log shows it was introduced in the update of 22 August 2025 for rates from 1 September 2025, and guidance on apportioning electric mileage between home and public charging was added on 6 October 2025. HMRC says the apportionment should be based on how much charging happens at each place and should be fair and reasonable. Our analysis of home charging as a fleet process covers the operational side of capturing that split.

Tax treatment and the link to AMAP

If an employer pays no more than the advisory rate for the car’s engine size and fuel type, HMRC treats the payment as creating no taxable profit and no Class 1A National Insurance liability. A higher rate can be paid if the employer can show that the actual fuel cost per mile is higher. Without that evidence, any excess on business mileage is taxable profit and counts as earnings for Class 1 National Insurance.

On private fuel, there is no fuel benefit charge if the employer correctly records all private mileage and the employee repays at the advisory rate or higher. HMRC’s manual at EIM25690 adds that a fuel-only mileage payment covering genuine business journeys leaves the car fuel benefit charge at nil, but payments covering journeys between home and a permanent workplace can still trigger a charge.

AMAP is a different regime for employees using their own vehicles. HMRC’s travel, mileage and fuel rates page, updated on 21 May 2026, sets the 2026 to 2027 car and van rate at 55p per mile for the first 10,000 business miles, up from 45p in 2025 to 2026, and 25p thereafter. Motorcycles stay at 24p and bicycles at 20p. HMRC’s National Insurance rules for mileage apply the same 55p car and van figure from 6 April 2026. Employees paid less than the approved amount can claim Mileage Allowance Relief on the difference.

• Company car, employer-funded vehicle: advisory fuel rates for business fuel and private fuel repayment.
• Employee’s own car or van: AMAP, covering all running costs.
• Fully electric company car: advisory electric rates, apportioned between home and public charging where both are used.

Evidencing business mileage and reclaiming VAT

The tax treatment depends on records. HMRC’s VAT on motoring expenses (Notice 700/64) allows an employer to reclaim input tax on the fuel element of a mileage allowance, calculated with the VAT fraction, provided the allowance reflects mileage actually driven. Section 9.9 expects records for each employee of miles travelled, whether journeys were business, private or both, the car’s cylinder capacity, the mileage rate paid and the input tax claimed. Fuel receipts must normally be kept and must predate the claim.

Electric cars are less straightforward for VAT. Notice 700/64 says electricity bought at a public charge point is supplied to the employer, who can generally recover VAT on business use, while home electricity is supplied to the employee, so the employer cannot recover that VAT. The notice states that HMRC is still considering how employers reimbursing actual home charging costs should evidence a claim.

For the employee’s own claims, HMRC’s guidance on vehicles used for work lists a mileage log with dates, miles, the reason for each journey and start and end postcodes. A comparable log is a sensible standard for company car drivers too, and telematics can supply it if the data definitions are agreed first, as our piece on fleet telematics governance argues.

Key points for fleet and payroll teams

• Use advisory fuel rates only for company cars: for business fuel reimbursement or private fuel repayment.
• Update expense systems on 1 March, 1 June, 1 September and 1 December, using the one-month grace period if needed.
• Pay above the advisory rate only with evidence of higher actual fuel cost per mile.
• Record a fair and reasonable split between home and public charging for electric company cars.
• Keep journey-level mileage records and fuel receipts to support both the tax position and any VAT claim.
• Apply AMAP, at 55p for the first 10,000 miles in 2026 to 2027, only to employees’ own vehicles.

This article is general information, not tax, legal or financial advice.

Sources

• GOV.UK: Advisory fuel rates
• HMRC: EIM25655, advisory fuel rates
• HMRC: EIM25690, business mileage payments at a fuel-only rate
• GOV.UK: Travel, mileage and fuel rates and allowances
• GOV.UK: Expenses and benefits, business travel mileage, rules for tax
• GOV.UK: Expenses and benefits, business travel mileage, rules for National Insurance
• HMRC: EIM31205, employees using own vehicles for work
• GOV.UK: VAT on motoring expenses (VAT Notice 700/64)
• GOV.UK: Claim tax relief for your job expenses, vehicles you use for work

Sources checked in November 2026. Rules, rates and schemes can change after publication, so check the linked official pages before acting.