A new tax year is around the corner, and if you provide company vehicles for personal use, now is the time to get up to speed with car fuel benefits. The 2026/27 tax year brings updated rates, revised reporting requirements, and additional changes that employers need to know.
We’ve put together everything you need to know about the 2026/27 car fuel benefit charge—from what it is, to the latest rates, and how to report to HMRC. It’s time to get into gear!
What is a car fuel benefit?
The car fuel benefit applies to UK taxpayers who use their company car for personal journeys and don’t pay for the fuel themselves. This applies to regular commuting too, it’s not just leisure trips that fall under company car fuel benefits.
What’s changed for 2026/27?
Following the 2025 Budget, several company car and van fuel benefit charges have been updated in line with the September 2025 Consumer Price Index (CPI):
- Car fuel benefit multiplier has increased to £29,200
- Van benefit charge has increased to £4,170
- Van fuel benefit charge has increased to £798
Current company cars and vans rates for 2026/27
Here’s what that looks like for 2026/27:
| Charge | Rate |
| Van benefit charge | £4,170 |
| Van fuel benefit charge | £798 |
| Car fuel benefit charge multiplier | £29,200 |
What are HMRC’s advisory fuel rates for company cars in 2026?
The rates below apply from 1 March 2026:
Diesel
| Engine size | Diesel — rate per mile |
| Up to 1600cc | 12p |
| Between 1601cc and 2000cc | 13p |
| Over 2000cc | 18p |
Petrol
| Engine size | Petrol — rate per mile | LPG — rate per mile |
| Up to 1400cc | 12p | 10p |
| Between 1401cc and 2000cc | 14p | 12p |
| Over 2000cc | 22p | 19p |
Electric: rate per mile
| Home charging | 7p |
| Public charging | 15p |
Hybrid
For advisory fuel rate purposes, hybrid cars are treated as either petrol or diesel vehicles—so apply the relevant petrol or diesel rate based on the engine type.
Do HMRC regularly update their fuel rates?
Yes, HMRC reviews advisory fuel rates every quarter to reflect changes in fuel prices. These updates happen on:
- 1 March
- 1 June
- 1 September
- 1 December
It’s good practice to keep up to date with these changes so you’re always working with the most current figures.
How to report company car fuel benefits to HMRC
You have two options when it comes to reporting your company car fuel benefits:
- P11D Form: Submit this form at the end of the tax year, along with other benefits.
- Payroll: Process the car fuel benefit through payroll, deducting tax in real time.
One update to be aware of is the changes to payrolling benefits. From April 2027, payrolling benefits will become mandatory. P11D forms are still valid from 2025/26 and 2026/27, but the deadline is closer than it might feel. If you are currently using P11D forms, it’s worth considering the switch to payroll processing now to stay ahead of the change.
Tax and Class 1A National Insurance Contributions on car fuel benefits
Your employees will need to pay income tax on any car fuel benefit they receive. The taxable value is worked out using HMRC’s appropriate percentage, which considers the car’s CO2 emissions. Lower emission cars have a lower percentage and higher emission cards receive a higher percentage—the range runs from 3% to 37%.
Your company also has contributions to make. You’ll need to pay Class 1A National Insurance Contributions on the value of the car fuel benefit provided to your people.
Worked example: calculating the company car fuel benefit charge
Let’s put this into practice. Meet Sarah. She drives a petrol company car with a list price of £28,000 and CO2 emissions of 120g/km, which gives her an HMRC appropriate percentage of 29%.
- Step 1: First, you need to calculate the taxable value. Multiply the car fuel benefit multiplier by the appropriate percentage: £29,200 × 29% = £8,468
- Step 2: Then, calculate the income tax due. Multiply the taxable value by Sarah’s 20% basic rate tax band: £8,468 × 20% = £1,693.60 per year (or roughly £141 per month)
- Step 3: Now, calculate the employer’s Class 1A NICs. Multiply the taxable value by the Class 1A NIC rate of 13.8%: £8,468 × 13.8% = £1,168.58 per year
So, in 2026/27, Sarah’s fuel benefit will cost her £1,693.60 in income tax, and her employer £1,168.58 in Class 1A NICs. It’s worth noting that Sarah’s actual private fuel costs are lower than £1,693.60 per year, she’d be better off repaying the fuel herself and opting out of the benefit entirely.
What method is used to calculate the fuel rates?
Here’s a brief explanation of how HMRC calculates their fuel rates:
- Mean MPG calculation: HMRC starts by determining the mean miles per gallon (MPG) based on manufacturers’ data. This figure is adjusted to reflect the distribution of specific models sold to businesses.
- Applied MPG adjustment: the mean MPG is then reduced by 15% to account for real-world driving conditions, recognising that actual fuel efficiency is often lower.
- Fuel price data: HMRC sources the petrol prices from the Department for Business, Energy, and Industrial Strategy, while LPG prices are taken from the Automobile Association website.
- Rate calculation: using the adjusted MPG and current fuel prices, HMRC calculates the advisory fuel rates
By doing all this, HMRC makes sure that the advisory fuel rates are accurate and reflective of real driving conditions and fuel costs. Here is the calculation breakdown:
Diesel
| Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Rate per mile | Advisory fuel rate |
| Up to 1600 | 55.7 | 141.3p | 642.2p | 11.5p | 12p |
| Between 1601 and 2000 | 49.6 | 141.3p | 642.2p | 13.0p | 13p |
| Over 2000 | 36.6 | 141.3p | 642.2p | 17.5p | 18p |
Petrol
| Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Rate per mile | Advisory fuel rate |
| Up to 1400 | 50.7 | 132.0p | 600.1p | 11.8p | 12p |
| Between 1401 and 2000 | 42.8 | 132.0p | 600.1p | 14.0p | 14p |
| Over 2000 | 27.2 | 132.0p | 600.1p | 22.1p | 22p |
LPG
| Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Rate per mile | Advisory fuel rate |
| Up to 1400 | 40.6 | 89.0p | 404.6p | 10.0p | 10p |
| Between 1401 and 2000 | 34.2 | 89.0p | 404.6p | 11.8p | 12p |
| Over 2000 | 21.7 | 89.0p | 404.6p | 18.6p | 19p |
Record-keeping requirements for fuel benefits
If you want to avoid the fuel benefit charge by having employees repay their private fuel costs, HMRC expects solid records to back that up. That means detailed mileage logs that distinguish business from personal trips, fuel receipts, and records of any repayments made.
Without adequate records, HMRC may apply the fuel benefit charge regardless—and the burden of proof sits with you as the employer. A good mileage tracking system isn’t just helpful here; it’s your saving grace if HMRC has questions.
Penalties for incorrect reporting
Getting company car fuel benefits wrong can be expensive. HMRC can charge penalties for inaccurate P11D submissions or incorrect payroll reporting, with the amount depending on whether the error is considered careless, deliberate, or concealed. Interest is also charged on late tax payments, and in more serious cases HMRC may open a formal compliance review covering several tax years.
The best way to avoid all of that? Keep accurate records, report on time, and use the correct rates—which is exactly why it’s worth staying up to date at the start of each new tax year.
Demystify company car fuel benefits with Capture Expense
Want to see first-hand how our platform streamlines calculations and reimbursements—all while keeping everything in line with HMRC’s advisory fuel rates—book a personalised demo today. From tracking every mile travelled to controlling spend with business expense cards, we’ve got everything you need to stay on track of every mile and every penny.
Can employees opt out of the car fuel benefit?
Yes—and for some employees, it may well be the better option. If an employee repays the full cost of all private fuel, the fuel benefit charge doesn’t apply. This is known as “making good” on the benefit, and to avoid the charge entirely, the full amount must be repaid by 6 July following the end of the tax year.
It’s worth communicating this option clearly—particularly to lower-mileage drivers, who might otherwise end up paying more in tax than the benefit is actually worth to them.
Is it worth taking a company car?
It really depends on how much an employee drives and spends on fuel. If they cover a lot of miles and their fuel costs exceed the value of the benefit charge, it usually works in their favour. But for lower-mileage drivers, the tax on the benefit could end up costing more than the fuel itself. It’s always worth doing the numbers before assuming it’s the right call.
Capture Expense Brochure
Unlock the power of real-time spending insights across your entire organisation. Dive into our brochure to discover how you can stay on top of reimbursements, bills, and credit card transactions as they happen, ensuring smarter financial decisions.