If your business provides company cars, it’s important to understand HMRC’s advisory fuel rates.
These rates are used for company cars and cover fuel only. They can help employers reimburse business mileage without creating a tax charge.
They can also be used when employees need to repay the cost of private fuel in a company car.
HMRC updates the rates every quarter, on 1 March, 1 June, 1 September and 1 December. The latest rates apply from 1 June 2026.
What are the advisory fuel rates?
Advisory fuel rates apply to company cars.
They are not the same as the mileage rates used when employees drive their own cars for business.
That’s an important distinction.
Advisory fuel rates only cover the cost of fuel. They do not include wear and tear, insurance, servicing or other running costs.
Advisory fuel rates from 1 June 2026
For petrol and LPG cars, the rate depends on engine size.
| Engine size | Petrol | LPG |
| 1,400cc or less | 14p per mile | 11p per mile |
| 1,401cc to 2,000cc | 17p per mile | 13p per mile |
| Over 2,000cc | 26p per mile | 21p per mile |
For diesel cars, the rates are:
| Engine size | Diesel |
| 1,600cc or less | 15p per mile |
| 1,601cc to 2,000cc | 17p per mile |
| Over 2,000cc | 23p per mile |
For fully electric company cars, the rate depends on where the vehicle is charged:
| Charging location | Electric |
| Home charger | 7p per mile |
| Public charger | 15p per mile |
Hybrid cars are treated as either petrol or diesel cars for these purposes. If an electric company car is charged partly at home and partly at a public charger, the mileage should be split on a fair and reasonable basis.
Reimbursing employees for business travel
If an employee uses a company car for business travel, the employer can use the advisory fuel rates to reimburse the fuel cost.
As long as the reimbursement is within HMRC’s rates, there should be no tax charge for the employee and no Class 1A National Insurance for the employer.
This makes the advisory fuel rates a simple and practical option for many small businesses.
Can you pay more than the advisory rate?
Yes, but you need to be careful.
If the employer pays more than the advisory fuel rate, the excess may be taxable unless the employer can show that the actual fuel cost was higher.
If the higher amount cannot be justified, the extra payment is treated as earnings. That means PAYE and Class 1 National Insurance may apply.
For most businesses, using HMRC’s advisory rates keeps things simpler and reduces the risk of unexpected tax issues.
What if employees use their own cars?
The advisory fuel rates should not be used where employees use their own cars for business journeys.
In that situation, employers should use the Approved Mileage Allowance Payment rates instead.
These rates are higher because they cover more than fuel. They also include other running costs, such as wear and tear, servicing and insurance.
Repaying private fuel in a company car
If an employer pays for private fuel in a company car, a fuel benefit tax charge can arise.
This charge can be expensive.
It is also an all-or-nothing charge. If the employer pays for any private fuel and the employee does not repay it in full, the fuel benefit charge can apply for the whole year.
To avoid the charge, the employee must repay the full cost of private fuel.
The advisory fuel rates can be used to work out how much the employee needs to repay.
What are the deadlines?
To remove the fuel benefit charge, the employee must repay the cost of private fuel by the correct deadline.
If the benefit is payrolled, the repayment must usually be made by 31 May after the end of the tax year.
If the benefit is reported on a P11D, the repayment must usually be made by 6 July after the end of the tax year.
Missing these deadlines can mean the fuel benefit charge still applies.
What about electric company cars?
There is no fuel benefit charge if an employer meets the cost of electricity for private journeys in a fully electric company car.
That means employees do not need to repay private electricity costs in the same way they would with petrol, diesel or LPG fuel.
However, employers should still keep clear mileage and charging records.
Why good records matter
Whether you’re reimbursing business mileage or asking employees to repay private fuel, accurate records are essential.
Your business should keep details of:
- Business mileage
- Private mileage
- Vehicle type and engine size
- Fuel type
- Charging location for electric vehicles
- Amounts reimbursed or repaid
Good records make it much easier to support your position if HMRC asks questions.
Need help with company car mileage and fuel rates?
Company car rules can be tricky, especially where business and private mileage are mixed.
If you’re unsure which rate to use, whether a fuel benefit charge applies, or how to deal with employee repayments, contact Jon or the team at Jon Davies Accountants.
We’ll help you get the rules right and avoid unnecessary tax costs.
If you found this useful, please share it using the icons at the side of the page, or leave a comment below.
Any questions?
If you’d like a meeting or a video call to discuss this, please get in touch with your favourite Liverpool accountant
- You can ring us on 0151 380 8080
- You can email us at gr****@*********************co.uk