HMRC Advisory Fuel Rates 2026: The Complete Guide for Business Drivers and Employers

If you run a company car, manage a fleet, or process mileage claims for your team, the HMRC Advisory Fuel Rates (AFRs) are something you can't afford to get wrong. They're updated every three months, and applying the wrong rate can leave you facing unexpected tax charges or awkward conversations during an HMRC Employer Compliance Review.

Here's everything you need to know about the rates currently in force, what changed in the latest update, and how to apply them properly.

What Are HMRC Advisory Fuel Rates?

Advisory Fuel Rates are HMRC-approved pence-per-mile figures used to work out fuel reimbursements when employees drive company cars for business journeys. They're also used when an employee has to pay their employer back for fuel used on private trips in a company vehicle.

Crucially, if you reimburse at or below the advisory rate, the payment isn't treated as taxable earnings and doesn't attract National Insurance. Pay above the rate without proper justification, and you could land yourself with a benefit-in-kind headache.

AFRs are different from the Approved Mileage Allowance Payments (AMAP) rates, which apply when employees use their own vehicles for work. Mixing the two up is one of the most common mistakes HMRC flags during compliance checks.

The Latest HMRC Advisory Fuel Rates (From 1 March 2026)

HMRC published updated rates taking effect from 1 March 2026. Petrol and diesel rates held steady this quarter, but LPG came down across the board and the public charging electric rate ticked up.

Petrol (Unchanged)

• 1,400cc or less: 12p per mile
• 1,401cc to 2,000cc: 14p per mile
• Over 2,000cc: 22p per mile

Diesel (Unchanged)

• 1,600cc or less: 12p per mile
• 1,601cc to 2,000cc: 13p per mile
• Over 2,000cc: 18p per mile

LPG (Reduced)

• 1,400cc or less: 10p per mile (down from 11p)
• 1,401cc to 2,000cc: 12p per mile (down from 13p)
• Over 2,000cc: 19p per mile (down from 21p)

Advisory Electric Rates

• Home charging: 7p per mile (unchanged)
• Public charging: 15p per mile (up from 14p)

When Do the New Rates Apply?

The 1 March 2026 rates are now the current figures, but HMRC gives a one-month grace period. Employers can continue using the previous quarter's rates until 31 March 2026 if it helps with payroll transitions. After that, you need to be on the new figures.

The next scheduled update is 1 June 2026, with further reviews on 1 September and 1 December.

How HMRC Calculates the Rates

Petrol and diesel rates are based on the latest pump prices from the Department for Energy Security and Net Zero (DESNZ), combined with average fuel efficiency figures for each engine size band. When wholesale fuel prices move significantly, HMRC adjusts the rates accordingly — which is why you sometimes see them jump mid-year.

The Advisory Electric Rate works slightly differently. HMRC divides the average electricity cost per kWh by typical EV efficiency (miles per kWh) to get the pence-per-mile figure. Since public charging is considerably more expensive than home charging, the two are now split — recognising the real-world difference in what drivers actually pay.

Worked Example: Reimbursing a Business Trip

Let's say your employee drives a 1,800cc petrol company car from Barnsley to Manchester and back — roughly 100 miles round trip.

At the current rate of 14p per mile for their engine size, the reimbursement works out as:

That £14 is tax-free and NI-free, providing the trip was genuinely for business. Simple enough — but multiply it across a fleet of 30 drivers doing thousands of miles a month and the accuracy of your rate really matters.

Common Mistakes Employers Make

Over the years, a few recurring errors crop up during HMRC compliance checks:

What About VAT on Mileage Claims?

If your business is VAT-registered, you can reclaim the VAT element of the fuel portion of mileage reimbursements — but only if you have valid fuel receipts covering the amount claimed. The fuel portion is calculated using the advisory rate:

So for that 100-mile Manchester trip at 14p per mile, £14 is your fuel portion. The VAT within that (at 20%) is £2.33 reclaimable — provided your employee has handed in fuel receipts totalling at least £14.

Electric Fleets: Why the Split Rate Matters

The split between home and public charging rates is a significant change from a few years ago, when HMRC applied a single flat rate. The gap — 7p versus 15p — is substantial, and reflects how differently EV drivers experience charging costs.

Home charging is cheap, predictable, and generally done overnight on domestic tariffs. Public rapid charging can cost four or five times more per kWh depending on the network, time of day, and charger speed. If you don't track where your drivers actually charged, you risk either underpaying them for genuine public charging costs or overpaying for home charging and creating a taxable benefit.

The practical answer for most fleets is clear charging policies, telematics or app-based tracking, and separate reimbursement categories for home and public charging.

Planning Ahead: What to Expect in June 2026

Global fuel markets have been volatile through early 2026, with ongoing Middle East tensions pushing crude oil prices higher. That feeds through to pump prices, and if the trend continues, the 1 June 2026 AFR update could see petrol and diesel rates rise for the first time in several quarters.

For fleet operators, that means budgeting flexibility into your reimbursement forecasts rather than assuming flat rates for the year.

Keeping On Top of the Rates

The easiest way to stay compliant is straightforward: set a recurring calendar reminder for the first of March, June, September and December. Check the HMRC figures on the day they publish, update your expense system, and communicate any changes to your drivers.

If you're reimbursing at the advisory rate and keeping proper records, you've done the hard work. Everything else is just admin.