Company Car Fuel Rates Updated: What Employers Need to Know

 

HMRC has released its latest review of Advisory Fuel Rates (AFRs), bringing updated mileage reimbursement figures for company car users from 1 March 2026. While petrol and diesel rates remain unchanged this quarter, there are important adjustments for LPG and electric vehicle users that employers and employees should understand. 

 

For businesses operating company car schemes, AFRs play a key role in determining how much employees can claim for business mileage, and how much they should repay for private fuel use without triggering additional tax liabilities. 

 

 

Advisory Fuel Rates are mileage rates published quarterly by HMRC. They are used when: 

 

 

If payments are made at or below the HMRC rate, there is normally no additional tax or National Insurance to pay. However, if employers reimburse above the advisory rate without evidence of actual costs, the excess could become taxable. 

 

It is important to note that AFRs apply only to company cars, not employees using their own vehicles for work. 

 

 

Engine Size Rate 

Up to 1400cc 12p per mile 

1401cc to 2000cc 14p per mile 

Over 2000cc 22p per mile 

 

Up to 1600cc 12p per mile 

1601cc to 2000cc 13p per mile 

Over 2000cc 18p per mile 

 

Up to 1400cc 10p 11p 

1401cc to 2000cc 12p 13p 

Over 2000cc 19p 21p 

 

Charging Location Rate 

Home charging 7p per mile 

Public charging 15p per mile 

 

The most notable changes this quarter are the reduction in LPG rates and the increase in the public charging rate for electric vehicles from 14p to 15p per mile. 

 

 

 

HMRC’s updated electric vehicle reimbursement reflects the rising cost of public charging. Businesses with EV fleets have increasingly argued that the previous flat electric mileage rate did not fairly reflect real-world charging expenses, especially for employees without home chargers. 

 

The introduction of separate home and public charging rates is designed to create a fairer system for EV drivers while supporting the continued transition toward electric fleets. 

 

 

Petrol and diesel rates remain unchanged for another quarter, suggesting relative stability in average fuel prices during the review period. However, some company car users argue that the official rates still fall short of actual running costs in many real-world situations. 

 

Recent discussions among UK drivers highlight concerns that reimbursement rates do not always reflect higher fuel prices, motorway driving, or less fuel-efficient vehicles used for specialist roles. 

 

 

Businesses operating company car schemes should review their policies and payroll systems immediately to ensure the correct rates are being used. 

 

Key actions include: 

 

 

HMRC also allows employers to continue using the previous rates for up to one month after the changes take effect, offering some flexibility during implementation. 

 

 

Keeping up with HMRC updates can be time-consuming, particularly for businesses managing company fleets, employee expenses, and payroll compliance. JSB Accountants can help businesses stay compliant with the latest Advisory Fuel Rates while ensuring reimbursement processes remain accurate and tax-efficient. 

 

From reviewing mileage policies and expense procedures to supporting payroll compliance and company car tax planning, JSB Accountants can provide tailored advice to help businesses avoid costly mistakes and unnecessary tax exposure. 

 

Whether you operate a small fleet or manage multiple company vehicles, expert guidance can help ensure your business remains fully compliant while supporting employees fairly. 

 

 

The latest HMRC review reflects the changing landscape of company car usage, particularly the continued rise of electric vehicles. While traditional fuel rates remain steady, the increase in public EV charging reimbursement signals HMRC’s recognition of the higher costs many EV drivers face away from home. 

 

For employers, staying compliant with AFR updates is essential to avoid unnecessary tax complications. For employees, understanding how these rates work can help ensure fair reimbursement and avoid unexpected tax charges. 

 

As fuel markets and EV infrastructure continue to evolve, businesses should expect AFR reviews to remain an important part of company car and fleet management throughout 2026.