HMRC reviews its advisory fuel rates four times a year, on 1 March, 1 June, 1 September and 1 December, and the table in force from 1 September 2026 ranges from 7p a mile for a home-charged electric car to 27p a mile for a petrol car above 2000cc [1]. Around 920,000 employees received a company car benefit in the 2024 to 2025 tax year, up from 840,000 a year earlier [9].
Every one of those cars raises the same two payroll questions. How much can the employer pay for business miles without creating a taxable profit, and how much must the employee repay for private miles to stay clear of the car fuel benefit charge? Advisory fuel rates, usually shortened to AFRs, answer both questions with a single pence-per-mile figure.
The rates are easy to confuse with the approved mileage allowance payments used for employees' own vehicles. They are lower, they move every quarter rather than every year, and they cover fuel only, because the employer already bears the cost of buying, insuring and maintaining a company car [11].
This article sets out the current rate table and how HMRC builds it, the two situations in which the rates apply, the tax and National Insurance consequences of paying above or below them, the private fuel repayment rules and the 6 July deadline, the VAT angle, electric and hybrid cars, and the practical controls a payroll team needs each quarter.
Key takeaways
- Advisory fuel rates apply only to company cars, and HMRC states they must not be used in any other circumstances [1].
- Paying no more than the advisory rate for business miles creates no taxable profit and no Class 1A National Insurance [1].
- HMRC changes the rates quarterly, and employers may keep using the previous rates for up to one month after a change [1].
- Private fuel must be repaid in full by 6 July following the end of the tax year, or the car fuel benefit charge applies in full [4] [5].
- The car fuel benefit multiplier is £29,200 for the 2026-27 tax year, so a full fuel benefit often costs far more than repaying private fuel [3].
- Car fuel moves into mandatory payrolling of benefits in kind from 6 April 2027 [8].
What advisory fuel rates are
Advisory fuel rates are guideline fuel-only mileage rates published by HMRC for company cars, set by engine size and fuel type [11]. They are not binding. An employer can pay a different rate, but the tax treatment of the payment depends on how it compares with the advisory figure.
Why the rates cover fuel only
A company car is bought or leased, insured, taxed and serviced by the employer. The only variable cost that a business journey adds for the employee is the fuel, so the advisory rate is built to reimburse fuel and nothing else [1]. By contrast, the approved mileage rate for an employee's own car is 55p a mile for the first 10,000 business miles and 25p after that, because it also covers depreciation, insurance and maintenance [2].
The guide to HMRC mileage rates covers the approved mileage allowance payments in detail. The short version is that the vehicle's ownership decides which table applies: employee-owned cars use approved mileage rates, company cars use advisory fuel rates.
The two situations in which the rates apply
HMRC sets out two uses and only two [1] [12]:
| Situation | Direction of payment | What the rate proves |
|---|---|---|
| Business travel in a company car, employee pays for fuel | Employer reimburses employee | No taxable profit in the reimbursement |
| Private travel in a company car, employer pays for fuel | Employee repays employer | The full cost of private fuel has been made good |
Outside those two cases the rates have no standing. They cannot be used for a van, a motorcycle or an employee's own car [1].
The current advisory fuel rate table
HMRC publishes the full table on GOV.UK, together with the rates for earlier quarters. The figures below apply from 1 September 2026 [1].
Petrol and LPG cars
Petrol and LPG share the same engine bands, with LPG rates set lower because LPG is cheaper per litre [1].
| Engine size | Petrol (pence per mile) | LPG (pence per mile) |
|---|---|---|
| 1400cc or less | 14p | 11p |
| 1401cc to 2000cc | 17p | 13p |
| Over 2000cc | 27p | 20p |
Diesel and electric cars
Diesel uses different engine bands from petrol, with the lowest band running up to 1600cc. Fully electric cars have their own rate, split by where the car is charged [1].
| Fuel and band | Pence per mile |
|---|---|
| Diesel, 1600cc or less | 15p |
| Diesel, 1601cc to 2000cc | 16p |
| Diesel, over 2000cc | 22p |
| Electric, home charger | 7p |
| Electric, public charger | 15p |
What changed from the previous quarter
The September review moved four figures and left the rest untouched. The comparison below uses the rates in force from 1 June 2026 to 31 August 2026 [1].
| Band | 1 June 2026 | 1 September 2026 |
|---|---|---|
| Petrol, over 2000cc | 26p | 27p |
| LPG, over 2000cc | 21p | 20p |
| Diesel, 1601cc to 2000cc | 17p | 16p |
| Diesel, over 2000cc | 23p | 22p |
The movements are small, but they matter on high-mileage fleets. A sales driver covering 2,000 business miles a month in a large diesel car is reimbursed £20 less each month at 22p than at 23p, and over-reimbursing by that amount creates a small taxable profit on every claim if the old figure is kept beyond the grace period [1] [11].
How HMRC calculates the rates
The rates are not arbitrary. HMRC combines an average fuel economy figure for each band with a national average fuel price, then rounds the result to the nearest penny [1].
The inputs behind each figure
Mean miles per gallon comes from manufacturers' information weighted by business sales over the last three years. Petrol and diesel prices come from the Department for Energy Security and Net Zero, and the LPG price from the Automobile Association [1]. LPG economy is taken as 20% lower than petrol because of its lower energy density [1].
| Band | Mean MPG | Fuel price per litre | Unrounded rate | Advisory rate |
|---|---|---|---|---|
| Petrol, 1401cc to 2000cc | 42.8 | 159.9p | 17.0p | 17p |
| Petrol, over 2000cc | 27.2 | 159.9p | 26.8p | 27p |
| Diesel, 1601cc to 2000cc | 49.6 | 179.2p | 16.4p | 16p |
| Diesel, over 2000cc | 36.6 | 179.2p | 22.2p | 22p |
| LPG, 1401cc to 2000cc | 34.2 | 95.0p | 12.6p | 13p |
The electric rate
The electric rate assumes 3.59 miles per kWh, weighted by car sales. A home charging cost of 24.47p per kWh gives 6.81p a mile, rounded to 7p, and a public charging cost of 54.00p per kWh gives 15.02p, rounded to 15p [1]. The gap between the two reflects the price difference between domestic tariffs and public rapid chargers, which is why HMRC publishes them separately.
Reimbursing business mileage in a company car
The most common use of the rates is the monthly mileage claim. The employee pays for fuel personally, logs business journeys, and the employer reimburses at a pence-per-mile figure through payroll or expenses.
Paying at or below the advisory rate
If the mileage rate paid is no higher than the advisory rate for the car's engine size and fuel type, there is no taxable profit and no Class 1A National Insurance [1]. The payment does not need to appear on a P11D and does not pass through the employee's taxable pay, because it falls within the exemption for amounts that would otherwise be deductible [11].
Worked example: an employee drives a 1.8 litre diesel company car and logs 1,200 business miles in October. At 16p a mile the reimbursement is £192, tax-free and free of National Insurance [1].
Paying above the advisory rate
Employers can use higher rates where their cars are more fuel efficient or business travel genuinely costs more, but they may need to show this [1]. HMRC's own example of a justified higher rate is a 4x4 vehicle driven over rough terrain, where fuel consumption is far above the band average [11].
Without that evidence, the excess above the advisory rate is a taxable profit and counts as earnings for Class 1 National Insurance [1]. Using the same employee, a flat 20p a mile produces £240 instead of £192. The £48 difference must run through payroll as taxable pay, with income tax under PAYE, employee National Insurance and employer National Insurance at 15% [1] [16].
Payroll software that holds a mileage rate per vehicle and splits each claim into its exempt and taxable elements avoids the manual calculation. HMRC-recognised payroll software for SMEs can apply the split automatically and report the taxable element on the Full Payment Submission.
Paying below the advisory rate
Nothing obliges an employer to pay the full advisory rate. A lower rate simply means the employee bears part of the fuel cost. Unlike the approved mileage rate for private cars, there is no tax relief mechanism for an employee in a company car to claim the shortfall back, because the advisory rate is a ceiling for tax-free reimbursement rather than a statutory entitlement [11] [2].
Private fuel and the car fuel benefit charge
The second use of the rates runs the other way. Many employers give company car drivers a fuel card and pay for all fuel, then ask the employee to repay the cost of private miles. The advisory rate is the yardstick for that repayment [12].
How the fuel benefit charge works
Car fuel benefit arises where fuel is provided for a car that also attracts a car benefit charge [14]. The charge is not related to what the fuel actually cost the employer. It is calculated by applying the car's appropriate percentage to a fixed multiplier, which is £29,200 for the 2026-27 tax year, up from £28,200 [3] [5].
The charge is all or nothing. Repaying part of the private fuel does not reduce it pound for pound; it falls to nil only when the employee makes good the cost of all private fuel [5]. The repayment can be made directly, through a deduction from pay, or by the employee buying an equivalent amount of fuel personally [4].
The 6 July deadline
From 2017-18 onwards, the cost of private fuel must be made good by 6 July following the end of the tax year in which the fuel was provided [4]. For fuel provided between 6 April 2026 and 5 April 2027, the deadline is therefore 6 July 2027. There is no fuel benefit charge where all private mileage is recorded and repaid at the advisory rate or higher [1].
If the employee does not repay, the employer reports the fuel benefit on form P11D and pays Class 1A National Insurance on it [7]. Employers that already process benefits through payroll will find the mechanics covered in the guide to payrolling benefits in kind.
Worked example: repay or accept the charge
A petrol company car emits 122g/km of CO2. The figure rounds down to 120g/km, giving an appropriate percentage of 30% for the 2026-27 tax year [13]. The engine is 1.6 litres, so the advisory rate is 17p a mile [1].
| Item | Repay private fuel | Accept fuel benefit |
|---|---|---|
| Private miles in the year | 3,000 | 3,000 |
| Cost to the employee | 3,000 x 17p = £510 | 30% x £29,200 = £8,760 benefit |
| Income tax at 40% on the benefit | Nil | £3,504 |
| Employer Class 1A at 15% | Nil | £1,314 |
The fuel benefit only becomes cheaper for the employee once private mileage passes roughly 51,500 miles a year (£8,760 divided by 17p), a figure few drivers ever reach [3] [1]. HMRC's latest statistics show only around 40,000 car fuel benefit recipients, against 920,000 company car recipients, which suggests most employers have already reached the same conclusion [9]. The wider company car charge is explained in the guide to company car tax.
When the advisory rate is not needed
The advisory rates are a safe harbour, not a requirement. An employee who repays the full actual cost of private fuel at a lower mileage rate, supported by evidence, does not need to use them [1]. HMRC can normally accept an employer's statement that employees must make good private fuel, provided suitable administrative controls are in place [4].
Electric and hybrid company cars
The electric rate has become more significant as fleets have switched. Fully electric cars carry an appropriate percentage of only 4% for the 2026-27 tax year, which has made them the default choice for many company car schemes [13].
Home and public charging
Where a car is charged both at home and on public chargers, the employer can apportion business mileage between the two rates on a fair and reasonable basis [1]. A higher rate can be used if the employer can show that the actual cost per mile is higher, which can apply to drivers who rely heavily on public rapid chargers [1].
Worked example: an electric company car covers 1,000 business miles in a month, with 60% of charging done at home and 40% on public chargers. The reimbursement is (600 x 7p) + (400 x 15p) = £42 + £60 = £102, all tax-free [1].
| Charging pattern for 1,000 miles | Tax-free reimbursement |
|---|---|
| All home charging (7p) | £70 |
| 60% home, 40% public | £102 |
| All public charging (15p) | £150 |
Hybrid cars
Hybrid cars do not have a separate rate. HMRC treats them as petrol or diesel cars for advisory fuel rate purposes, using the engine size band [1]. A plug-in hybrid with a 2.0 litre petrol engine is therefore reimbursed at 17p a mile, even if part of the journey ran on battery power. Their appropriate percentage, by contrast, depends on CO2 emissions and electric range, ranging from 4% to 16% in the 1 to 50g/km band [13].
Employers weighing electric cars through salary sacrifice will find the interaction explained in the guide to the salary sacrifice car scheme.
VAT on company car fuel
Advisory fuel rates also help VAT-registered employers recover input tax on the fuel element of mileage payments. HMRC generally accepts its own advisory fuel rates, or published motoring association rates, as the fuel element of a mileage allowance [6].
Reclaiming VAT on reimbursed business fuel
Input tax is the fuel element multiplied by the VAT fraction. At the standard rate of 20%, the fraction is 20/120, or one sixth [6]. In the diesel example above, the £192 reimbursement contains £32 of reclaimable VAT. The employer must hold fuel invoices covering that fuel, and an invoice dated after the claim period cannot support the claim [6].
Records should show each employee's mileage, whether each journey was business or private, the engine size, the rate paid and the input tax claimed [6].
Private fuel and the fuel scale charge
Where the business pays for all fuel and the car is used privately, there are four VAT options: reclaim everything and pay the road fuel scale charge, reclaim only the business share using detailed mileage records, reclaim nothing, or reclaim all VAT where there is no private use at all [6]. The scale charge depends on CO2 emissions. The table below shows sample annual figures for the period from 1 May 2026 to 30 April 2027 [10].
| CO2 band | 12-month charge | VAT due |
|---|---|---|
| 120g/km or less | £657.00 | £109.50 |
| 150g/km | £1,314.00 | £219.00 |
| 200g/km | £1,971.00 | £328.50 |
| 225g/km or more | £2,297.00 | £382.83 |
The VAT scale charge and the income tax fuel benefit are separate regimes. An employee who repays private fuel in full avoids the fuel benefit charge, but the employer still needs to account for VAT on the amount charged to the employee if it reclaimed all the input tax [6].
Running advisory fuel rates through payroll
Because the rates change four times a year, the main operational risk is a stale figure sitting in a payroll or expenses configuration for months.
The quarterly update and grace period
New rates apply from 1 March, 1 June, 1 September and 1 December, and employers may use the previous rates for up to one month from the date new rates apply [1]. In practice, claims for September journeys could still be paid at the June rates, but claims for October journeys should use the September table.
A payroll team that processes claims monthly needs one check per quarter:
- Download the new table from GOV.UK on the review date [1].
- Update the rate held against each fuel type and engine band.
- Confirm which journey dates fall inside the one-month grace window.
- Recalculate any fixed monthly fuel allowances so they do not exceed the new rate.
- Record the date the new rates were applied, as evidence for an HMRC compliance review.
Mandatory payrolling from April 2027
The reporting landscape is about to change. From 6 April 2027, company cars, car fuel, vans and van fuel must be reported and taxed through payroll in real time rather than on form P11D [8]. Most other benefits follow from 6 April 2028 [8].
For car fuel, that means a fuel benefit that is not repaid will be taxed month by month through the Full Payment Submission. Employers that let private fuel repayments drift until year end will see the benefit appear on payslips first and disappear only when repayment is made, which makes accurate AFR-based repayment schedules more important than ever. The guide to mandatory payrolling of benefits sets out the wider timetable.
Bureaux and platforms
Accountants who manage fleet clients face the quarterly update across every client at once. A multi-client payroll dashboard holds a single advisory rate table and applies it to every client payroll, rather than relying on each client to update its own settings. Software platforms that handle expenses can go further and call an HMRC-recognised payroll API to post the taxable element of each mileage claim straight into the pay run.
Conclusion
Advisory fuel rates look like a small reference table, yet they decide whether hundreds of thousands of monthly mileage claims are tax-free and whether a company car driver faces a fuel benefit worth thousands of pounds. The arithmetic is simple: reimburse business miles at or below the advisory rate, recover private miles at or above it, and keep the records that prove both.
The pressure on accuracy is rising. Quarterly changes, the growth in electric fleets with split charging rates, and the move of car fuel into real-time payrolling from 6 April 2027 all push the calculation out of the year-end P11D exercise and into every pay run. Employers that treat the advisory rate as a live payroll parameter, updated on each review date, will find the transition far smoother than those that check it once a year.
Frequently asked questions
Can advisory fuel rates be used for an employee's own car?
No. HMRC states that advisory fuel rates apply only to employees using a company car and must not be used in any other circumstances. An employee driving a private car for business is reimbursed under the approved mileage allowance rates instead, which are 55p a mile for the first 10,000 business miles and 25p thereafter for the 2026-27 tax year.
How often do HMRC advisory fuel rates change?
HMRC reviews the rates quarterly, on 1 March, 1 June, 1 September and 1 December. Some bands stay the same at a review while others move by a penny or two, depending on fuel prices. Employers can continue to use the previous rates for up to one month after new rates take effect.
Can an employer pay more than the advisory fuel rate?
Yes, but the excess is taxable and subject to Class 1 National Insurance unless the employer can show that the actual fuel cost is higher than the advisory rate. Examples include cars that are less fuel efficient than the band average or vehicles regularly used on rough terrain. Without evidence, the difference must be processed through payroll as taxable pay.
What happens if an employee does not repay all private fuel?
The full car fuel benefit charge applies, calculated as the car's appropriate percentage of the £29,200 multiplier for the 2026-27 tax year. Partial repayment does not reduce the charge, because it is removed only when all private fuel is made good by 6 July after the end of the tax year. The employer then reports the benefit and pays Class 1A National Insurance on it.
