HMRC Confirms New Fuel Charges for Drivers: Up to £2,297

HMRC has confirmed new VAT road fuel scale charges for business vehicles, with 22 bands costing up to £2,297 annually. The changes took effect on May 1, 2026, and businesses must apply the updated scales from the start of their next prescribed accounting period beginning on or after that date.

How the New Charges Work

The VAT road fuel scale charges are based on a car's CO2 emissions and the length of the VAT accounting period, which can be one, three, or 12 months. Businesses need to calculate the correct charge using the appropriate band.

Hugh Acland, chief commercial officer at Capital on Tap, warned that many businesses default to reclaiming VAT in full and applying the scale charge without checking if it is the most cost-effective option. He explained: "The scale charge is a flat rate based on emissions, not actual usage, so if private mileage is low, it can mean paying more VAT than necessary."

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Alternative Approaches

Acland suggested that in some cases, a simpler mileage-based approach or only reclaiming VAT on business use could work out better. He urged small businesses to remember that once the scale charge is introduced, it must be applied consistently across all vehicles, making it "even more important to get the decision right."

The flat rate values apply to one individual for a specific vehicle for the relevant accounting period. Making the correct choice could help drivers reduce unnecessary costs and avoid overpaying over the long term.