Understanding company car mileage rates and HMRC advisory fuel rates for 2026–27 is essential for both employers and employees. These rates determine how much businesses can reimburse for work-related travel and whether those payments are tax-free.

HMRC regularly updates these figures to reflect fuel and electricity costs. From 1 March 2026, updated advisory rates apply to petrol, diesel, LPG, and electric company cars. In addition, the Approved Mileage Allowance Payments (AMAP) rules still apply where employees use their own vehicles for business travel.

This guide explains the latest HMRC mileage rates, advisory fuel rates, and electric vehicle updates for the 2026–27 tax year.

What Are HMRC Advisory Fuel Rates?

HMRC Advisory Fuel Rates (AFRs) are recommended mileage rates used when employees drive company cars for business travel.

They are mainly used in two situations:

• Employers reimbursing employees for business mileage in company cars

• Employees repaying the employer for fuel used for private journeys

If a business reimburses mileage at or below HMRC advisory rates, there is normally no taxable benefit or National Insurance liability.

HMRC reviews these rates quarterly to reflect changes in fuel prices.

HMRC Advisory Fuel Rates (From 1 March 2026)

Petrol Company Cars

Engine SizeRate per MileUp to 1400cc12p1401cc – 2000cc14pOver 2000cc22p

Diesel Company Cars

Engine SizeRate per MileUp to 1600cc12p1601cc – 2000cc13pOver 2000cc18p

LPG Company Cars

Engine SizeRate per MileUp to 1400cc10p1401cc – 2000cc12pOver 2000cc19p

These rates apply from 1 March 2026 and may change in future quarterly updates.

Electric Company Car Mileage Rates (2026)

Electric vehicles now have two separate advisory electricity rates, depending on where the car is charged.

Charging LocationRate per MileHome charging7pPublic charging15p

Businesses can split mileage between home and public charging where appropriate, as long as the calculation is reasonable and supported by records.

These changes reflect rising public charging costs and increased adoption of electric company vehicles.

Mileage Allowance Rates for Employees Using Their Own Car

If employees use their own vehicle for business travel, the HMRC Approved Mileage Allowance Payments (AMAP) rates apply.

Cars and Vans

• 45p per mile for the first 10,000 business miles per year

• 25p per mile for any additional miles

Other Vehicles

Vehicle TypeRate per MileMotorcycle24pBicycle20p

Payments within these limits are normally tax-free and do not need to be reported to HMRC.

Company Car vs Personal Car: Key Differences

Vehicle TypeMileage System UsedCompany carHMRC Advisory Fuel RatesEmployee’s own carApproved Mileage Allowance PaymentsElectric company carAdvisory electricity ratesPersonal electric carSame AMAP rates (45p/25p)

Understanding this difference is important because the allowable reimbursement can vary significantly depending on who owns the vehicle.

Practical Example

Example 1 – Company Car

An employee drives a 1.8L petrol company car and travels 1,000 business miles.

Reimbursement calculation:

14p × 1,000 miles = £140

This can usually be paid tax-free if it does not exceed HMRC advisory rates.

Example 2 – Personal Car

An employee uses their own car and drives 1,000 business miles.

45p × 1,000 miles = £450

This can normally be paid tax-free under AMAP rules.

Why Mileage Rates Matter for Businesses

Correctly applying HMRC mileage rates helps businesses:

• Avoid taxable benefit issues

• Prevent unexpected PAYE or NIC liabilities

• Ensure employees are reimbursed fairly

• Maintain accurate expense policies

Employers can pay higher rates if they wish, but any excess above HMRC limits may become taxable income.

Tips for Employers

Businesses should consider the following when managing company car expenses:

✔ Maintain accurate mileage logs
✔ Review reimbursement policies regularly
✔ Monitor quarterly HMRC advisory rate updates
✔ Keep records of electric charging locations

Proper documentation helps avoid disputes or tax complications.

Frequently Asked Questions

Are HMRC advisory fuel rates mandatory?

No. They are guidelines. However, if employers reimburse above these rates, the excess may be treated as a taxable benefit.

Do advisory fuel rates apply to personal cars?

No. They only apply to company cars. Personal vehicles use the Approved Mileage Allowance Payments (AMAP) rates.

Can businesses pay higher mileage rates?

Yes, but amounts above HMRC limits may need to be reported through PAYE or P11D.

How often do HMRC fuel rates change?

HMRC typically reviews advisory fuel rates every quarter to reflect changes in fuel and electricity prices.

Need Help with Company Car Tax or Mileage Claims?

Managing mileage allowances, company car benefits, and P11D reporting can be complex. At S & B Accountants, we help businesses stay compliant while maximising tax efficiency.

If you need advice on company car tax, mileage claims, or employee expense policies, contact our team today.