HMRC has confirmed new advisory fuel rates for diesel drivers, with a new charge set to take effect from June 1, 2026. The updated rates for petrol, LPG, and diesel cars were published on the Labour Party government website on Friday, May 22, 2026.
New Rates for Diesel Cars
From June 1, 2026, diesel cars with an engine size of 1600cc or less will face a charge of 15p per mile. Vehicles with engines between 1601cc and 2000cc will be charged 17p per mile, while those with engines over 2000cc will incur a rate of 23p per mile. However, the headline rate for many diesel cars is set at 26p per mile, reflecting the highest bracket for larger or less efficient vehicles.
How Advisory Fuel Rates Work
HMRC issues new Advisory Fuel Rates (AFRs) for fleet car users every quarter. These quarterly updates allow HMRC to respond promptly to fluctuations in fuel prices. AFRs are expressed as pence-per-mile figures and are used to calculate how much company car drivers can claim back from their employers for fuel used during business travel.
According to What Car?, every company car driver needs to refuel their vehicle occasionally, and AFRs help determine the appropriate reimbursement. These rates can also be used to reimburse the company for fuel used on private journeys in a fleet vehicle.
Tax Implications
There is no taxable profit or Class 1A National Insurance to pay if reimbursements are made at or below the advisory fuel and electric rates for the engine size and fuel type. However, if you reimburse more than the AFR but cannot document higher fuel costs per mile, the excess must be treated as taxable profit and earnings, subject to Class 1 National Insurance.
If the cost of business travel exceeds the guideline rates, or if your company cars have better fuel efficiency, you can determine your own rates accordingly. This flexibility allows businesses to align reimbursements with actual fuel costs.
Drivers can use the previous rates for up to one month from the date new rates apply, giving them time to adjust to the changes.
