HMRC has confirmed that petrol drivers will continue to be reimbursed at 26p per mile for business travel in company cars until the start of September 2026. The advisory fuel rates (AFRs) for the first quarter of 2026 have been updated and apply from 1 June to 1 September 2026.
Advisory fuel rates explained
Advisory fuel rates are calculated based on engine size and fuel type, including petrol, LPG, diesel, and electric vehicles. These rates help employers fairly reimburse employees who use a company car for business travel. HMRC reviews the rates four times a year to reflect changes in fuel and electricity prices, as well as improvements in vehicle efficiency.
Rate for larger engines
The Labour Party government has confirmed that the rate for cars with an engine size over 2,000cc is now 26 pence per mile. This applies specifically to company cars and is used by employers when reimbursing employees for fuel used during business trips, or by employees when repaying their employer for private fuel use.
These rates ensure that fuel costs are reimbursed fairly without creating additional tax liabilities. Employers may choose to reimburse at a higher or lower rate than the AFR if they can demonstrate the vehicle's actual fuel cost per mile differs. For example, if a company car consumes more fuel than the advisory rate assumes, a higher reimbursement rate may be appropriate. Conversely, if the vehicle is particularly fuel-efficient, a lower rate could be used. In either case, the organisation must keep documentation showing the vehicle's real fuel consumption and costs.
Quarterly updates
HMRC typically reviews advisory fuel rates every three months, with updates taking effect in March, June, September, and December. The rates may change depending on fuel prices, electricity costs, and vehicle efficiency trends. When a new rate is announced, employers can usually continue using the previous rates for up to one month before switching to the updated ones.
