HM Revenue & Customs (HMRC) has introduced higher advisory fuel rates for company car drivers from June 1, increasing reimbursement levels for petrol, diesel and LPG vehicles as fuel prices remain elevated across the UK.
The updated figures are designed to help employers calculate fuel reimbursements for business journeys undertaken in company cars and determine the amount employees should repay when company-funded fuel is used for private travel. While the changes have attracted attention among motorists, they do not represent a new tax or charge on private vehicle owners.
The June revision marks the first significant increase in advisory fuel rates for a year and comes as energy markets continue to feel the effects of geopolitical tensions and supply concerns. Higher crude oil prices have pushed up fuel costs, leading HMRC to revise the mileage rates used by businesses across the country.
HMRC reviews advisory fuel rates four times each year, on March 1, June 1, September 1 and December 1. The latest rates came into effect on June 1 and are expected to remain in place until the next review on September 1.
New HMRC fuel rates from June 1
Drivers of petrol-powered company cars with engines of up to 1400cc can now claim 14p per mile, compared with 12p previously. For petrol vehicles between 1401cc and 2000cc, the rate increases to 17p per mile from 14p, while larger petrol cars above 2000cc rise to 26p per mile from 22p.
Diesel company car users are also affected by the changes. Vehicles with engines up to 1600cc now attract a rate of 15p per mile, up from 12p. Cars between 1601cc and 2000cc increase to 17p per mile from 13p, while diesel vehicles above 2000cc rise sharply to 23p per mile from 18p.
For LPG vehicles, HMRC has increased rates across all engine categories. Cars up to 1400cc now qualify for 11p per mile, up from 10p. Vehicles between 1401cc and 2000cc move to 13p from 12p, while LPG vehicles above 2000cc increase to 21p per mile from 19p.
Electric vehicle reimbursement rates remain unchanged despite the wider increases. HMRC continues to allow 7p per mile for company cars charged at home and 15p per mile for charging carried out using public charging infrastructure.
The split-rate system for electric vehicles, introduced earlier this year, remains in force. HMRC says employers can apportion mileage between home and public charging where both methods are used during a reimbursement period, provided the calculation is fair and reasonable.
Why the rates have increased
The advisory fuel rates are based on fuel price assumptions published by HMRC. For the latest update, the department used average fuel prices of approximately ÂŁ1.568 per litre for unleaded petrol and ÂŁ1.888 per litre for diesel.
Those calculations draw on fuel pricing data supplied by the Department for Energy Security and Net Zero (DESNZ), while LPG pricing is sourced separately. Rising wholesale fuel costs have been a major factor behind the latest increases.
Oil markets have remained volatile throughout 2026, with Brent crude trading close to $100 per barrel. Concerns over shipping routes through the Strait of Hormuz and ongoing instability in the Middle East have added pressure to global energy supplies, contributing to higher petrol and diesel prices.
For employers, the updated rates mean expense systems and payroll processes may need reviewing to ensure mileage claims are being reimbursed correctly. For employees, the revised figures could lead to higher payments for business journeys, particularly for those driving larger petrol and diesel company vehicles.
The difference between engine bands can have a noticeable impact. A driver covering thousands of business miles annually in a petrol vehicle above 2000cc will now be reimbursed at 26p per mile, compared with 17p per mile for a mid-sized petrol vehicle.
HMRC also applies specific rounding rules when calculating advisory fuel rates. Mileage costs are initially calculated to one decimal place before being rounded to the nearest whole penny. Where a figure ends in 0.5, HMRC examines the underlying unrounded value before determining whether it should be rounded up or down.
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The latest increase highlights how rising transport and energy costs continue to influence reimbursement policies. Similar trends have emerged internationally, with the 2026 IRS mileage rate update demonstrating how governments and employers are adjusting mileage allowances to reflect changing economic conditions.
Businesses and employees seeking additional information can review the latest guidance through the official HMRC advisory fuel rates page. The next review is scheduled for September 1, when reimbursement rates could be revised again depending on fuel market conditions.
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