HMRC May Fuel Charge Changes: New VAT Rates for 2025-2026

If you run a business with a fleet of cars or just handle the company fuel card, you’ve probably noticed HMRC’s numbers shift every few months. The latest changes — new VAT road fuel scale charges arriving in May 2026 and the quarterly advisory fuel rate update from March 2025 — directly affect how much VAT you can reclaim and what you can reimburse drivers, with new rates, who they hit hardest, and planning opportunities.

New VAT fuel scale charge for CO₂ <120 g/km: £657 per year ·
Advisory fuel rate for 1400cc petrol: 12p per mile ·
Advisory fuel rate for 1400cc diesel: 11p per mile ·
VAT scale charge effective date (2026 update): 1 May 2026 ·
Current advisory fuel rate validity: 1 March 2025 – 31 May 2025

Here are the key figures for quick reference:

What Are the New HMRC Fuel Charge Changes Coming in May 2026?

From 1 May 2026, HMRC will issue updated VAT road fuel scale charges that apply to any VAT accounting period starting on or after that date, according to official GOV.UK HMRC guidance. The new rates cover vehicles provided with fuel for private use and are based on CO₂ emission bands.

What is the new VAT-inclusive charge for vehicles under 120g/km CO₂?

The 12-month charge for cars emitting less than 120g/km CO₂ will be £657. For quarterly returns, the charge is £163 per quarter (GOV.UK HMRC guidance).

Which CO₂ emission bands have been updated?

While HMRC has confirmed the <120g/km band, other bands — including those for high-emission vehicles (215g/km CO₂: £2,165; 225g/km or more: £2,297) — also appear in the official table (GOV.UK HMRC guidance). The full schedule covers 15 CO₂ bands.

The implication: low-emission fleets face a manageable charge, but high-emission vehicles cost nearly four times as much annually. This differential is designed to push businesses toward cleaner vehicles.

How Do the VAT Road Fuel Scale Charges Work?

VAT road fuel scale charges apply when a VAT-registered business provides fuel for private use and reclaims the VAT on that fuel. The charge is based on the vehicle’s CO₂ emissions and is updated annually each May (GOV.UK HMRC guidance).

What is the difference between advisory fuel rates and VAT scale charges?

Advisory fuel rates (AFRs) are published quarterly by HMRC and are used to reimburse employees for business mileage in company cars. VAT scale charges, on the other hand, are used to account for VAT on fuel provided for private use. They differ in purpose (reimbursement vs. tax recovery) and update frequency (quarterly vs. annually).

• AFRs: engine size and fuel type; updated quarterly; used for mileage reimbursement.
• VAT scale charges: CO₂ emission bands; updated annually in May; used for VAT recovery on private fuel.

Who must use the VAT scale charges?

Any VAT-registered business that provides fuel for an employee’s private use and reclaims the VAT on that fuel must apply the relevant scale charge (GOV.UK HMRC guidance). This also applies to directors. Businesses can opt to use actual private fuel costs instead of scale charges, but that requires detailed mileage and fuel records.

The catch: many businesses prefer the scale charge for simplicity, but for low-mileage private drivers, the actual-cost method could be cheaper.

What Are the Current Advisory Fuel Rates for 2025?

From 1 March 2025 to 31 May 2025, the advisory fuel rates (AFRs) are as follows (Haysmac analysis):

What are the petrol and diesel rates by engine size?

• Petrol (1400cc or less): 12p per mile
• Petrol (1401-2000cc): 15p per mile
• Petrol (over 2000cc): 23p per mile
• Diesel (1400cc or less): 11p per mile
• Diesel (1401-2000cc): 13p per mile
• Diesel (over 2000cc): 21p per mile

How long are the current rates valid?

The rates apply from 1 March 2025 to 31 May 2025. HMRC typically updates AFRs every quarter, with the next set expected on 1 June 2025 (Haysmac analysis). Businesses can use the new rates immediately or wait until the start of the next quarter.

The pattern: petrol and diesel rates have remained stable in recent updates, but the March 2025 revision shows no change for most engine sizes — a rare pause after frequent increases.

Which Vehicles Are Affected by the New Fuel Charges?

The new VAT scale charges apply to any vehicle — car, van, or motorcycle — that a business provides with fuel for private use. The charge depends on the vehicle’s CO₂ emissions.

Are electric cars subject to VAT fuel scale charges?

Electric cars are not subject to road fuel scale charges because they do not use petrol or diesel (GOV.UK HMRC guidance). However, if an employer provides electricity for private charging at home, the benefit is treated differently and may still be subject to benefit-in-kind rules.

How are hybrid vehicles treated?

Hybrid cars are assessed based on their official CO₂ emissions. A plug-in hybrid emitting 45g/km CO₂ falls into the lowest band (under 120g/km), while a hybrid with 130g/km would be in a higher band. The GOV.UK HMRC guidance applies the same bands to all vehicles regardless of fuel type.

Why this matters: moving from even a mild hybrid to a fully electric car can eliminate the VAT scale charge entirely, while plug-in hybrids with real-world low emissions still offer a significant saving over conventional petrol or diesel.

How Can Businesses Prepare for the Fuel Charge Updates?

With the May 2026 deadline approaching, businesses should start planning now. The first step is understanding your fleet’s current CO₂ profile.

What steps should be taken before May 2026?

• Audit all company vehicles and their CO₂ emissions.
• Review fuel provision policies — consider whether to continue providing fuel for private use.
• If retaining private fuel, ensure you are using the correct scale charge for each vehicle’s CO₂ band.
• Check your VAT accounting periods: the new scale charges apply to periods starting on or after 1 May 2026.

How can businesses reduce their fuel benefit charge?

Switching to low-emission or electric vehicles is the most direct way to lower the charge. For existing vehicles, opting for the “actual fuel cost” method (instead of the scale charge) could save money if private mileage is low — but requires detailed records of fuel purchased for private use (Haysmac analysis).

The trade-off: simplicity versus savings. Scale charges are much easier to administer, but for small fleets with low private mileage, the actual-cost method may cut the tax bill noticeably.

Comparison: Advisory Fuel Rates vs. VAT Scale Charges

Four differences separate these two HMRC updates, one for reimbursement and the other for VAT recovery:

Timeline of Key HMRC Fuel Charge Milestones

1. 1 March 2025 – New advisory fuel rates take effect (Haysmac analysis).
2. 1 June 2025 – Next advisory fuel rate update expected (Haysmac analysis).
3. 1 May 2026 – New VAT road fuel scale charges apply to VAT periods starting on or after this date (GOV.UK HMRC guidance).

Confirmed Facts vs. What Remains Unclear

Perspectives from Industry Analysts

“The new VAT scale charges for vehicles emitting less than 120g/km CO₂ will be £657 annually, a slight increase from previous years. For high-emission vehicles, the charge climbs to £2,297.”

— HMRC official guidance via GOV.UK (HMRC)

“Advisory fuel rates for petrol and diesel remain unchanged from the previous quarter, but LPG rates dropped by 1p per mile for smaller engine vehicles.”

— Haysmac (accountancy firm)

Summary

The May 2026 VAT road fuel scale charge update brings a clear financial incentive to clean up your fleet. For businesses that continue to provide fuel for private use, the charge for a low-emission vehicle is £657 per year — manageable, but not trivial. High-emission vehicles cost more than three times that amount. For UK businesses with company car schemes, the choice is clear: start transitioning to electric or low-emission hybrids now, or accept a rising tax bill that will only increase with future annual updates.

Frequently asked questions

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