HMRC Adjusts Company Car Fuel Rates from September 1
HM Revenue & Customs (HMRC) has confirmed changes to its advisory fuel rates for company cars, with the new figures taking effect from September 1. The rates, which are updated quarterly, apply to employees using company cars for business travel, as well as for reimbursing employers for private use.
What's Changing
The September update sees three rates reduced and one increased. Diesel vehicles with engines between 1,601cc and 2,000cc will see their rate fall from 17p to 16p per mile, while those with engines over 2,000cc drop from 23p to 22p. LPG vehicles with engines greater than 2,000cc also see a 1p reduction, from 21p to 20p per mile.
In contrast, the rate for petrol vehicles with engines over 2,000cc rises from 26p to 27p per mile. Rates for smaller petrol engines, as well as most diesel and LPG categories, remain unchanged. Electric vehicles continue to attract the same rates as before: 7p per mile for home charging and 15p per mile for public charging.
How the Rates Work
Advisory fuel rates are set by HMRC to help employers reimburse staff for fuel used during business travel in company cars, or for employees to repay the company for fuel consumed on private journeys. According to the RAC, these rates are "set by government to assist businesses in reimbursing or being reimbursed for fuel costs of company cars." They are reviewed four times a year—on 1 March, 1 June, 1 September and 1 December—to reflect changes in fuel prices and vehicle efficiency.
The latest update was confirmed on Friday, August 21, with the new schedule added to the HMRC website.
Importantly, the rates apply only to company cars. For employees using their own vehicles for business travel, the Approved Mileage Allowance Payment (AMAP) rate of 55p per mile for the first 10,000 miles applies instead. Hybrid vehicles do not have a separate rate; they continue to use the corresponding petrol or diesel engine size rate.
Transitional Arrangement
Employers are allowed a one-month grace period to adjust to the new rates. They can continue using the June 2026 rates until 30 September 2026, before the September figures become mandatory.
Basis for the Figures
HMRC says the latest petrol and diesel prices are taken from the Department for Energy Security and Net Zero (DESNZ), while the LPG average is sourced from the Automobile Association website. The advisory electric rate is calculated using electricity price data from DESNZ and the Office for National Statistics (ONS), along with car electrical consumption rates from the Department for Transport (DfT) and annual car sales volumes to businesses.
The public charging rate additionally incorporates data from the Zapmap Price Index.
Market Context
In its latest quarterly update, the Competition and Markets Authority (CMA) raised concerns about "passive pricing strategies" used by the majority of fuel retailers and noted that some did not immediately pass on falls in wholesale diesel prices to drivers between May and June. This context may help explain the reductions in diesel and LPG rates, though HMRC's adjustments are based on its own data sources.