Diesel drivers are facing updated fuel advisory rates that came into effect at the beginning of this month. On Friday, May 22, HMRC confirmed the advisory fuel rates for petrol, LPG, and diesel cars.
New Rates from June 1, 2026
From June 1, 2026, diesel cars with an engine size of 1600cc or less will be charged at 15p per mile, while those with engines between 1601cc and 2000cc will face a 17p per mile charge. These rates apply until September 1, 2026.
Purpose of Advisory Fuel Rates
Employers can use these rates to reimburse company car drivers for business fuel expenses. The rates are also applicable when employees need to repay the cost of fuel used for private travel. HMRC reviews these rates quarterly on March 1, June 1, September 1, and December 1.
Treatment of Hybrid and Electric Cars
Hybrid cars are treated as either petrol or diesel vehicles for the purpose of these rates. For fully electric company cars charged at both public and residential locations, mileage can be apportioned based on where charging occurs. The apportionment calculation must be fair and reasonable.
VAT Implications
These amounts also apply for VAT purposes, but employers can only reclaim input VAT if the employee provides a receipt.
Background and Historical Context
On December 1, 2017, the then Conservative government announced it had reviewed the position and had no plans to change the existing system. It specifically stated it would not introduce separate rates for hybrid and electric cars. However, in August 2018, HMRC announced that from September 1, 2018, if employers pay up to the advisory rate (then four pence per mile) for business travel in a fully electric company car, there is no profit for Income Tax or earnings for National Insurance purposes.
Employer Flexibility
Employers can use their own rates if they better reflect their circumstances, such as if their cars are more efficient or if business travel costs are higher than the guideline rate. If an employer pays a rate above the advisory rate and cannot demonstrate higher electricity costs per mile, the excess must be treated as taxable income and as earnings for Class 1 National Insurance purposes.
