New HMRC Advisory Fuel Rates from 1 September 2026: What Company Car Drivers Need to Know

HMRC's latest Advisory Fuel Rates take effect today, 1 September 2026. While most rates have stayed the same, there are a few changes for drivers of larger petrol, diesel and LPG company cars.

The headline is fairly simple: the rate for petrol cars over 2,000cc has increased by 1p per mile, while several diesel and LPG rates have fallen by 1p.

These may look like small adjustments, but they can make a noticeable difference over a year for someone covering a lot of business miles.

The new rates from 1 September 2026

Petrol company cars

Diesel company cars

LPG company cars

Fully electric company cars

What do Advisory Fuel Rates actually cover?

Advisory Fuel Rates, usually shortened to AFRs, are designed for employees driving company cars.

They can be used in two main situations:

• When an employer reimburses an employee for fuel used on a business journey
• When an employee needs to repay their employer for private fuel used in a company car

They are fuel-only rates. They are not intended to cover servicing, insurance, depreciation or the other costs involved in owning and running a vehicle.

If an employer reimburses business mileage at no more than the appropriate AFR, there is normally no taxable profit for the employee and no Class 1A National Insurance for the employer.

Employers are allowed to use a higher rate where the real fuel cost per mile is higher, but they need evidence to support it. This could be relevant for a particularly inefficient vehicle or an electric car regularly charged at more expensive public chargers.

Who gains and who loses from today's update?

Drivers of petrol cars with engines over 2,000cc receive the only increase this quarter, moving from 26p to 27p per mile.

Over 1,000 business miles, that amounts to an additional £10 in reimbursement.

Drivers of medium and large diesel company cars see the opposite change. The rate for a diesel between 1,601cc and 2,000cc falls from 17p to 16p, while the rate for a diesel over 2,000cc drops from 23p to 22p.

The largest LPG category also falls by 1p, from 21p to 20p per mile.

Again, that represents a difference of £10 for every 1,000 miles claimed. It is unlikely to transform anyone's finances, but it matters to regular business drivers and to employers managing a larger fleet.

Why have some rates changed?

HMRC reviews the rates four times a year, on 1 March, 1 June, 1 September and 1 December.

The calculations use average fuel prices alongside expected fuel economy for different engine sizes. For this quarter, HMRC used a petrol price of 159.9p per litre and a diesel price of 179.2p per litre.

That helps explain why the changes are not uniform. The rates are based on estimated fuel cost per mile rather than a simple rise or fall applied across every vehicle.

The figures are also rounded to the nearest whole penny. A relatively small movement in the underlying calculation can therefore be enough to move one category by a penny while another remains unchanged.

Electric car rates remain unchanged

The separate electric rates remain in place:

• 7p per mile when charging at home
• 15p per mile when using public chargers

That gap reflects the substantially higher average cost of public charging.

Where a company car is charged both at home and in public, HMRC allows the mileage to be divided between the two rates. The calculation needs to be fair and reasonable, so it is worth keeping a record of where the vehicle has been charged.

HMRC also allows a higher public charging rate where the driver or employer can demonstrate that the actual electricity cost per mile was higher than 15p.

Hybrid company cars do not use the electric rates. They are treated as either petrol or diesel vehicles according to their fuel type and engine size.

These rates do not apply to your own car

This is an important distinction and one that is easily missed.

AFRs only apply when an employee is using a company car. If you use your personally owned vehicle for work, the separate approved mileage allowance rules apply instead.

The advisory rates should not be treated as a general mileage allowance for every business journey.

Employers have a short transition period

HMRC allows the previous rates to be used for up to one month after new rates take effect. This gives employers time to update payroll and expenses systems without having to make the change overnight.

Drivers should check which rate their employer is using during the transition, particularly if a claim includes journeys made either side of 1 September.

The bottom line

There is no sweeping change in this quarter's update. Most company car drivers will continue claiming or repaying fuel at exactly the same rate as before.

The exceptions are drivers of:

• Petrol cars over 2,000cc, whose rate rises by 1p per mile
• Diesel cars between 1,601cc and 2,000cc, whose rate falls by 1p
• Diesel cars over 2,000cc, whose rate falls by 1p
• LPG cars over 2,000cc, whose rate falls by 1p

For occasional business travel, the difference will be modest. For high-mileage drivers and larger fleets, however, even a penny per mile soon adds up.

The new rates apply from 1 September 2026, with HMRC's next scheduled quarterly review taking place on 1 December.

The complete figures and HMRC's explanation of how they are calculated can be found in the official Advisory Fuel Rates guidance.