HMRC reviews its advisory fuel rates (AFRs) every quarter — in March, June, September, and December — based on movements in fuel prices. The rates effective from 1 June 2026 are the latest update, and if your business reimburses company car drivers for fuel, or recovers VAT on fuel for business mileage, it's worth a quick check that you're using the current figures.
Advisory fuel rates are HMRC's recommended pence-per-mile figures for reimbursing employees who use a company car for business travel, broken down by engine size and fuel type (petrol, diesel, LPG, fully electric).
What advisory fuel rates are for
AFRs exist for two main purposes: reimbursing employees for business mileage in a company car without creating a taxable benefit, and allowing employers to recover the fuel element of mileage payments for VAT purposes. They apply specifically to company cars — not to employees using their own vehicles, where the separate Mileage Allowance Payments (MAP) rates of 45p/25p per mile apply instead.
Confirm you're using the rates effective from 1 June 2026
HMRC publishes the updated rates on GOV.UK at the start of each quarter, broken down by engine size band (petrol: up to 1400cc, 1401–2000cc, over 2000cc; diesel: up to 1600cc, 1601–2000cc, over 2000cc; LPG bands; and a single rate for fully electric vehicles).
If your payroll or expenses software has hard-coded mileage rates, this is the moment to update them. If you use Xero or QuickBooks expense claims with a mileage rate set in the system configuration, check the rate matches the current quarter's published figures for each vehicle's fuel type and engine size.
The Advisory Electricity Rate (AER)
For fully electric company cars, HMRC publishes a separate Advisory Electricity Rate (AER), reviewed at the same quarterly intervals. With electric company cars becoming more common, this is increasingly relevant — if your fleet includes EVs, make sure the AER (not a petrol/diesel rate) is being applied to electric mileage reimbursements.
What happens if you use the wrong rate
Reimbursing at a rate higher than HMRC's advisory rate doesn't automatically create a tax problem, but the excess above the advisory rate may be treated as a taxable benefit unless you can demonstrate that actual fuel costs justify the higher rate. Reimbursing below the rate isn't a compliance issue, but means employees are out of pocket for business travel — worth reviewing if it's been a while since rates were last checked against what's actually being paid.
If you don't use company cars
If your business reimburses mileage for employees using their own vehicles, the relevant rates are the standard Mileage Allowance Payments — 45p per mile for the first 10,000 business miles in a tax year, and 25p per mile after that, for cars and vans (these rates have remained unchanged for some time, but it's worth confirming current figures if it's been a while since you checked).
Want your payroll and expense rates kept current automatically?
As part of my bookkeeping service, I keep an eye on quarterly rate changes so your payroll and expense claims always reflect the latest HMRC figures. Book a free 30-minute call to find out more.