UK HMRC Advisory Fuel Rates 2026 Q1: Company Car Reimbursement

HMRC Advisory Fuel Rates (AFRs) set the approved per-mile reimbursement figures for company car travel. If your employer provides a company car and pays for fuel, or if you need to repay private fuel costs, these rates determine the correct amount. They are reviewed and updated quarterly, so it is important to use the rates in force at the time of travel.

What Are Advisory Fuel Rates?

HMRC Advisory Fuel Rates are the approved reimbursement rates for business travel in a company car. They serve two purposes:

1. Employer reimburses employee -- when an employee uses their company car for business travel and the employer does not have a fuel card arrangement, the employer can pay the employee at AFR rates without triggering a taxable benefit.
2. Employee repays employer -- when an employer provides a company car with all fuel paid (including private fuel), the employee can repay the private use element at AFR rates to avoid the fuel benefit charge.

AFRs are not the same as Approved Mileage Allowance Payments (AMAPs). AMAPs (45p per mile for the first 10,000 miles, 25p thereafter) apply when you use your own private vehicle for business travel. AFRs only apply to company cars owned or leased by the employer.

Q1 2026 Advisory Fuel Rates

HMRC updates AFRs quarterly -- typically in March, June, September and December. The Q1 2026 rates (effective from 1 March 2026) reflect recent fuel price movements.

Petrol Rates

Diesel Rates

LPG Rates

Electric Vehicles

The Fuel Benefit Charge: Why AFRs Matter

If your employer provides a company car and also pays for all your fuel -- including private journeys -- you face a P11D fuel benefit charge. For 2026/27, the charge is calculated as:

£27,800 x the vehicle's CO2 percentage

This can result in a substantial tax bill. For example, a car with a 30% CO2 percentage would generate a fuel benefit of £8,340. A higher rate taxpayer would pay 40% tax on this -- £3,336 per year, simply for having private fuel paid.

The solution: repay your employer for all private fuel at the AFR rate. If you do this, the fuel benefit charge is eliminated entirely. You need to keep a mileage log separating business and private journeys, then calculate private miles multiplied by the applicable AFR.

How to Calculate Your Repayment

The calculation is straightforward:

1. Record your total mileage during the period
2. Identify the business miles (which your employer reimburses or which are exempt)
3. Calculate private miles = total miles minus business miles
4. Multiply private miles by the relevant AFR for your engine size and fuel type
5. Pay this amount to your employer

Example: You drive 1,200 miles in a month in a petrol company car with a 1600cc engine. Business miles are 800. Private miles are 400. At the Q1 2026 rate of 15p/mile: 400 x £0.15 = £60 repayment.

If you pay this £60, the fuel benefit for that month is fully neutralised.

AFRs vs AMAPs: Understanding the Difference

Many people confuse Advisory Fuel Rates with Approved Mileage Allowance Payments. Here is the key distinction:

AMAPs apply when you use your own car for business travel. Your employer can pay you up to 45p per mile for the first 10,000 business miles per tax year, and 25p per mile thereafter, without any tax or NI liability. If your employer pays less than the AMAP rate, you can claim the shortfall as a tax deduction.

AFRs apply when you use a company car for business travel. Your employer reimburses you for the actual fuel cost of business journeys. The rates are much lower than AMAPs because they represent only the fuel cost -- not depreciation, insurance or maintenance, which the employer already covers through the company car.

Using AMAP rates for a company car, or AFR rates for your own vehicle, would be incorrect and could create a tax liability.

Hybrid Vehicles

Hybrid vehicles use the petrol or diesel AFR rates (whichever is appropriate for the engine). For plug-in hybrids, HMRC has confirmed that the electric rate of 4p/mile can be used for any electric-only miles, but only if the employer can verify that those miles were driven electrically. In practice, many employers simply apply the petrol AFR to all miles for simplicity.

Record Keeping Requirements

To use AFRs correctly, you need adequate records:

• A mileage log recording dates, journey purposes, start and end points, and mileage for each business journey
• Details of the vehicle's engine size and fuel type
• Records of fuel purchases if required by your employer

HMRC can challenge AFR claims if records are inadequate. The employer is responsible for ensuring correct rates are applied and for keeping evidence.

What If Rates Change Mid-Journey?

AFRs apply from the date HMRC announces the new rates. You should use the rate in force at the time of the journey. If you are calculating a repayment that spans two quarterly periods, you may need to apply different rates to journeys made before and after the rate change date.

Planning Points

Consider whether a company car fuel benefit is worth it. Many employees find that the tax cost of having private fuel paid exceeds the actual value of the free fuel, particularly for low-mileage private drivers. Repaying at AFR rates is often the more tax-efficient approach.

Check your engine size. The AFR bands are set by engine size, which is stated in your V5 logbook or vehicle documentation. Using the wrong rate can result in underpayment (creating a benefit) or overpayment (which is simply inefficient).

Electric vehicles are increasingly common. If your employer is transitioning the fleet to EVs, the 4p/mile electric AFR is significantly lower than petrol rates. For high private mileage EV drivers, this makes repayment very cheap.

Frequently Asked Questions

What are HMRC Advisory Fuel Rates used for? AFRs are used to calculate the correct amount for employees to repay private fuel costs in a company car, or for employers to reimburse employees for business travel in a company car, without creating a taxable benefit.

How often do HMRC advisory fuel rates change? HMRC reviews and updates AFRs quarterly -- typically in March, June, September and December each year. Always check the current rates on the HMRC website before making calculations.

Can I use AMAP rates (45p/mile) for a company car? No. AMAP rates apply only to your own private vehicle. Using AMAP rates for a company car would be incorrect and may result in a taxable benefit or underpayment.

What is the electric vehicle advisory fuel rate for 2026? HMRC has set the advisory rate for electric company cars at 4p per mile for Q1 2026. This reflects the lower cost of electricity compared to petrol or diesel.

What happens if I do not repay private fuel costs at the AFR rate? If your employer pays for all your fuel and you do not repay private mileage costs, you will face a P11D fuel benefit charge. For 2026/27 this is £27,800 multiplied by the vehicle's CO2 percentage -- potentially a very large taxable benefit.

Do AFRs apply to vans and commercial vehicles? No. AFRs apply specifically to cars. For vans, HMRC has a separate approved mileage rate. The fuel benefit charge rules for vans are also different.

What engine size band applies to my car? Check your V5C logbook or the vehicle's registration documents. The engine size in cc determines which AFR band applies. For petrol cars, the bands are: up to 1400cc, 1401-2000cc, and above 2000cc.

Can I claim tax relief if my employer pays less than the AFR? If your employer reimburses you at less than the AFR rate for business travel in a company car, you cannot claim additional tax relief. The AFR is the maximum approved rate, not a minimum. However, you may be able to negotiate with your employer.

What records do I need to keep? You should maintain a mileage log showing dates, journey purposes, start and end locations, and mileage for each business trip. These records support any AFR claims and can be requested by HMRC.

How does the fuel benefit charge compare to just repaying at AFR? For most drivers, repaying private fuel at AFR rates costs less than accepting the fuel benefit charge. Calculate your private miles per year multiplied by the AFR, and compare this to your tax rate applied to £27,800 x CO2 percentage. For lower mileage private drivers, repayment is almost always cheaper.