HMRC Advisory Fuel Rates: New June 2026 Updates Out

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Key Takeaways:

• HMRC advisory fuel rates are updated quarterly.
• New rates became effective from 1 June 2026.
• Most petrol, diesel, and LPG rates increased from March 2026 levels.
• Electric vehicles have separate rates for home and public charging.
• The rates apply only to company cars.
• Hybrid vehicles are treated as petrol or diesel vehicles.
• Employers can use previous rates for up to one month after a new update.
• Following the correct rates helps businesses avoid tax complications.

What Are HMRC Advisory Fuel Rates and Why Do They Matter in 2026?

HMRC advisory fuel rates (AFRs) are official mileage reimbursement rates published by HM Revenue & Customs to help employers calculate fuel-related expenses for company car drivers.

These rates are intended to simplify the process of reimbursing employees for business mileage or recovering fuel costs associated with private journeys made in company vehicles.

The rates are reviewed every quarter to reflect changes in fuel prices and vehicle efficiency data. As fuel costs continue to fluctuate and electric vehicles become more common in company fleets, the June 2026 update carries particular significance for employers and employees alike.

Businesses rely on HMRC advisory fuel rates because they provide a recognised benchmark for calculating fuel expenses without creating unnecessary tax liabilities. Using the correct rates can help organisations maintain compliance while ensuring employees are fairly reimbursed for work-related travel.

Who Can Use HMRC Advisory Fuel Rates?

Company Car Drivers and Employers

HMRC advisory fuel rates apply exclusively to company cars. Employers use them when reimbursing employees for fuel used during business journeys or when recovering the cost of fuel used during private travel.

Employees driving their own vehicles for work cannot use these rates. Instead, they must follow separate mileage allowance rules.

For employers operating company car schemes, advisory fuel rates provide a practical framework for managing fuel reimbursements while reducing the risk of payroll and taxation errors. Businesses of all sizes, from SMEs to large corporations, frequently rely on these rates when processing travel expenses.

What Is the Difference Between Advisory Fuel Rates and Mileage Allowance Rates?

Many employees confuse HMRC advisory fuel rates with Approved Mileage Allowance Payments (AMAPs). Advisory fuel rates apply only to company cars and cover fuel or electricity costs. AMAP rates apply when employees use their own vehicles for work and are designed to cover fuel, maintenance, depreciation, and other running costs.

What Are the New HMRC Advisory Fuel Rates Effective from June 2026?

The June 2026 update introduces higher rates across most fuel categories. The increases reflect rising fuel costs and updated calculations based on vehicle efficiency data.

June 2026 HMRC Advisory Fuel Rates

The largest increase occurred in the diesel over-2000cc category, which rose by 5p per mile compared with March 2026, reflecting ongoing fuel cost pressures.

Businesses should update mileage reimbursement systems promptly to ensure claims submitted after 1 June 2026 reflect the latest HMRC guidance.

How Have HMRC Advisory Fuel Rates Changed Compared With Previous Quarters?

Comparison Between March 2026 and June 2026 Rates

The June 2026 rates represent one of the most noticeable quarterly increases in recent years, particularly for diesel vehicles and larger-engine petrol cars.

These increases mean that businesses reimbursing thousands of miles each month may see a noticeable rise in travel-related expenses.

Richard Foster, a fleet cost management consultant, noted: “The June 2026 AFR increases will have an immediate impact on organisations with large company car fleets. Reviewing reimbursement budgets now can help businesses avoid unexpected cost pressures later in the year.”

What Are the June 2026 HMRC Advisory Fuel Rates for Petrol, Diesel, and LPG Vehicles?

The latest advisory fuel rates vary depending on engine size and fuel type. Larger engines generally consume more fuel and therefore attract higher reimbursement rates.

Petrol Advisory Fuel Rates

Petrol vehicles continue to account for a significant proportion of UK company cars.

The updated petrol rates are:

Businesses operating executive or larger-engine company cars should pay particular attention to the increase in the over-2000cc category.

Diesel Advisory Fuel Rates

Diesel vehicles have experienced some of the largest increases in the June 2026 update.

The higher diesel rates reflect current fuel pricing trends and updated efficiency calculations.

LPG Advisory Fuel Rates

LPG remains a smaller segment of the company vehicle market but still benefits from specific HMRC reimbursement rates.

Although LPG rates are generally lower than petrol and diesel rates, businesses using LPG-powered vehicles should still ensure reimbursement systems reflect the latest figures.

What Are the Advisory Electric Rates for Fully Electric Cars?

Electric vehicles have become an increasingly important part of company fleets, leading HMRC to provide dedicated advisory electric rates.

Unlike petrol and diesel vehicles, electric car reimbursement rates are based on charging costs rather than engine size.

Home Charging Rate

The advisory electric rate for home charging remains 7p per mile.

This rate reflects the average cost of domestic electricity and vehicle energy consumption. Employers can use this figure when employees charge company vehicles at home and undertake business journeys.

The home charging rate provides a straightforward method for reimbursing employees without requiring detailed electricity cost calculations for every trip.

Public Charging Rate

HMRC has introduced a dedicated public charging rate of 15p per mile.

Public charging costs are often substantially higher than domestic electricity prices. This separate rate acknowledges the growing use of commercial charging networks by company car drivers.

Businesses with employees who regularly travel long distances may find the public charging rate particularly relevant as charging infrastructure continues to expand across the UK.

How Do Employers Use HMRC Advisory Fuel Rates for Business Mileage Reimbursement?

Employers use HMRC advisory fuel rates to reimburse employees for fuel consumed during business journeys in company cars.

When reimbursement rates do not exceed HMRC’s published figures, there is generally no taxable benefit and no additional Class 1A National Insurance liability.

Simple Reimbursement Example

For example, if an employee drives a petrol company car with an engine size between 1401cc and 2000cc and completes 500 business miles during June 2026, the reimbursement would be:

500 miles × 17p = £85

Using practical examples like this helps employers and employees understand how the advisory rates are applied in real-world situations.

The rates help organisations establish consistent reimbursement policies while reducing administrative complexity. Many payroll and expense management systems are configured around HMRC advisory fuel rates to streamline processing and maintain compliance.

How Can Employees Repay Fuel Costs for Private Mileage?

Where employers pay for all fuel used in a company vehicle, employees may need to repay the cost of fuel consumed during private journeys.

Accurate mileage records are essential for calculating these repayments. Businesses should encourage employees to maintain detailed logs showing business and private travel separately.

Using the correct advisory fuel rate helps ensure that fuel benefit charges do not arise unnecessarily. Failure to recover sufficient fuel costs could lead to additional tax consequences for both employers and employees.

How Are HMRC Advisory Fuel Rates Calculated?

HMRC uses a structured methodology to calculate advisory fuel rates, incorporating fuel prices, vehicle efficiency, and broader market data.

The objective is to produce rates that reasonably reflect average operating costs across the company car market.

Fuel Price Data and Vehicle Efficiency

HMRC considers average fuel prices alongside vehicle fuel efficiency data. Information from manufacturers and fleet sales statistics contributes to these calculations.

By combining fuel costs with average miles-per-gallon performance, HMRC can estimate the fuel cost associated with each mile travelled. This approach helps ensure the rates remain realistic and representative of actual business motoring expenses.

Quarterly HMRC Rate Reviews

HMRC reviews advisory fuel rates every quarter:

• 1 March
• 1 June
• 1 September
• 1 December

Regular reviews enable the rates to respond to changes in fuel markets and evolving vehicle technologies.

Quarterly updates also ensure employers have access to current reimbursement guidance rather than relying on outdated fuel cost assumptions.

How Are Electric Vehicle Advisory Rates Determined?

Electric vehicle advisory rates are calculated differently from petrol and diesel rates because they rely on electricity consumption rather than fuel consumption.

HMRC uses data relating to average electricity prices, vehicle efficiency, and charging behaviour. Home charging rates are based primarily on domestic electricity costs, while public charging rates reflect commercial charging network pricing.

This methodology helps ensure that reimbursement rates remain aligned with real-world charging expenses faced by company car drivers.

As electric vehicle adoption continues to grow, the importance of accurate charging reimbursement policies is likely to increase further.

What Do the New Electric Vehicle Charging Rates Mean for Businesses?

The introduction of separate home and public charging rates provides greater flexibility for employers managing electric vehicle fleets.

Businesses can now align reimbursements more closely with actual charging costs, reducing the likelihood of underpayment or overpayment.

The distinction is particularly important for employees who spend significant time travelling between client sites or attending meetings across different regions.

Employers may wish to review internal travel policies and expense claim procedures to ensure they accommodate both charging scenarios appropriately.

How Are Hybrid Vehicles Treated Under HMRC Advisory Fuel Rates?

Hybrid vehicles often create confusion because they combine electric power with a petrol or diesel engine. However, HMRC does not allow hybrid vehicles to use the advisory electric rates.

Instead, hybrid vehicles must use the advisory fuel rate that corresponds to their primary fuel type:

Employers should ensure drivers understand this distinction, as using electric advisory rates for hybrid vehicles could result in incorrect reimbursement calculations.

For advisory fuel rate purposes, HMRC treats hybrid vehicles as either petrol or diesel cars. This means hybrid drivers do not use the advisory electric rates when claiming mileage reimbursements.

Can Employers Use Different Rates Than HMRC Advisory Fuel Rates?

Although HMRC advisory fuel rates are widely used, employers are not always required to follow them exactly.

Businesses may use alternative rates if they can demonstrate that actual fuel costs justify a different figure.

Situations Where Higher Rates May Be Applied

In some circumstances, actual fuel costs may exceed the published advisory rate. For example, specialised vehicles or unusually expensive charging arrangements may create higher operating costs.

Employers wishing to use higher rates should retain sufficient evidence to support their calculations.

Without appropriate justification, excess payments may be treated as taxable earnings, creating additional reporting obligations.

What Is the One-Month Transition Period for New Fuel Rates?

HMRC allows employers to continue using the previous quarter’s rates for up to one month after new rates come into effect.

This transition period provides organisations with additional time to update payroll systems, mileage software, and internal reimbursement procedures.

For the June 2026 update, employers may continue using March 2026 rates until the end of June if necessary.

However, many businesses prefer to implement the new rates immediately to ensure reimbursement accuracy.

Why Do HMRC Advisory Fuel Rates Not Apply to Company Vans?

HMRC advisory fuel rates are specifically designed for company cars and do not apply to vans.

Commercial vans often have different operating characteristics, fuel consumption patterns, and business usage requirements. As a result, employers generally need to account for actual fuel costs when managing van-related expenses.

Businesses operating mixed fleets should ensure they apply the correct reimbursement methodology to each vehicle category.

What Tax Implications Should Employers Understand When Using Advisory Fuel Rates?

Tax compliance is one of the primary reasons businesses rely on HMRC advisory fuel rates.

When reimbursement rates remain within HMRC guidelines, employers can generally avoid creating taxable benefits. However, overpayments may trigger income tax and National Insurance consequences.

Employers should also ensure private fuel repayments are calculated correctly. Failure to recover sufficient private fuel costs could result in fuel benefit charges.

Maintaining accurate mileage records remains one of the most effective ways to support compliance and reduce risk.

How Can Businesses Ensure Compliance With HMRC Fuel Reimbursement Rules?

Businesses can improve compliance by establishing clear travel expense policies and regularly reviewing reimbursement procedures.

Key compliance measures include maintaining detailed mileage records, applying the correct advisory fuel rates, updating systems after quarterly HMRC announcements, and retaining documentation supporting any alternative rates.

Regular internal audits can also help identify potential issues before they develop into larger compliance concerns.

James Turner, a corporate tax adviser, stated: “Accurate mileage records remain the foundation of HMRC compliance. Businesses that consistently document business and private travel are far less likely to encounter issues during tax reviews.”

When Will HMRC Advisory Fuel Rates Be Updated Again?

HMRC reviews advisory fuel rates every quarter. Following the June 2026 update, the next scheduled review is expected to take effect from 1 September 2026.

Businesses that reimburse company car mileage should monitor future announcements to ensure reimbursement systems remain aligned with the latest HMRC guidance.

Conclusion

The June 2026 HMRC advisory fuel rates update introduces important changes for employers and company car drivers across the UK. With increased rates for petrol, diesel, and LPG vehicles, alongside distinct home and public charging rates for electric cars, businesses should ensure their reimbursement policies reflect the latest guidance.

Applying the correct rates supports tax compliance, improves expense management, and helps employees receive fair reimbursement for business travel. As HMRC continues its quarterly reviews, organisations should remain proactive in monitoring future updates and adjusting their mileage policies accordingly.

Frequently Asked Questions

Are HMRC Advisory Fuel Rates Mandatory for Employers?

No. Employers can use different reimbursement rates if they can demonstrate that those rates accurately reflect actual fuel costs.

Do HMRC Advisory Fuel Rates Apply to Leased Company Cars?

Yes. HMRC advisory fuel rates apply to qualifying company cars, whether they are owned, leased, or provided through a company car scheme.

Can Employers Pay Less Than the Advisory Fuel Rate?

Yes. Employers can choose to reimburse at a lower rate, although employees may wish to check whether additional tax relief is available.

Can Electric Vehicle Drivers Use Both Home and Public Charging Rates?

Yes. Employers can reimburse using the relevant advisory rate depending on whether the vehicle was charged at home or at a public charging point.

What Records Should Employees Keep for Mileage Claims?

Employees should keep accurate mileage records, including travel dates, destinations, business purposes, and the number of miles travelled.

What Happens If an Employer Continues Using Old Advisory Fuel Rates?

HMRC allows employers to use the previous rates for up to one month after new rates take effect, giving businesses time to update their systems.