A new tax year is here, and if your organisation provides company vehicles for personal use, now’s a good time to make sure your payroll team is across the latest changes. The 2026/27 tax year brings updated rates, revised reporting requirements, and a few things worth flagging for anyone responsible for running payroll.
We’ve put together everything you need to know about the 2026/27 company car fuel benefit charge—from what it is, to the latest rates, how to report to HMRC, and what’s coming down the line.
What is a company car fuel benefit?
The company car fuel benefit applies to UK employees who use their company car for personal journeys and don’t personally pay for the fuel. It’s a benefit in kind (BIK)—which means it has a taxable value and needs to be reported to HMRC.
And it’s not just leisure trips that count. Regular commuting also falls under the company car fuel benefit rules, so it’s worth making sure your people are clear on what applies to them.
For payroll teams, this matters because you’ll either be reporting it via a P11D at year end or—increasingly—processing it directly through payroll. More on that shortly.
What's changed for 2026/27?
Following the 2025 Autumn Budget, several company car and van fuel benefit charges have been updated in line with the September 2025 Consumer Price Index (CPI). Here’s what’s new:
- Car fuel benefit multiplier has increased to £29,200
- Van benefit charge has increased to £4,170
- Van fuel benefit charge has increased to £798
These are the figures your payroll team needs to use when calculating taxable values for 2026/27—so it’s worth updating any templates or payroll configurations now.
Current company car and van rates for 2026/27
Here’s a quick overview of the headline rates:
| Charge | Rate | Increase (from 2024/25) |
|---|---|---|
| Van benefit charge | £4,170 | £150 |
| Van fuel benefit charge | £798 | £29 |
| Car fuel benefit charge multiplier | £29,200 | £1,000 |
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HMRC advisory fuel rates for company cars in 2026 /27
Below are the rates set by HMRC from 1 March 2026. These are the figures used to calculate reimbursements where employees are reclaiming business mileage in a company car—or repaying fuel costs to avoid the benefit charge.
Petrol
| Engine size | Petrol — rate per mile | LPG — rate per mile |
|---|---|---|
| 1400cc or less | 12 pence | 10 pence |
| 1401cc to 2000cc | 14 pence | 12 pence |
| Over 2000cc | 22 pence | 19 pence |
Diesel
| Engine size | Diesel — rate per mile |
|---|---|
| 1600cc or less | 12 pence |
| 1601cc to 2000cc | 13 pence |
| Over 2000cc | 18 pence |
Electric
| Charging type | Rate per mile |
|---|---|
| Home charging | 7 pence |
| Public charging | 15 pence |
Hybrid
For advisory fuel rate purposes, hybrid cars are treated as either petrol or diesel—so apply the relevant petrol or diesel rate based on the engine type. It’s a common point of confusion, so worth confirming with any employees who drive hybrids.
Do HMRC regularly update their fuel rates?
Yes. HMRC reviews advisory fuel rates every quarter to reflect changes in fuel prices. Updates happen on:
- 1 March
- 1 June
- 1 September
- 1 December
Good payroll practice means keeping up with these quarterly changes—particularly if you’re reimbursing business mileage in company cars, where using the wrong rate could mean over or underpaying your people.
How to report company car fuel benefits to HMRC
As a payroll team, you’ve got two options when it comes to reporting company car fuel benefits:
- P11D form: Submit this form at the end of the tax year, along with other benefits in kind. It’s still valid for 2025/26 and 2026/27, but the deadline does creep up fast.
- Payrolling benefits: Process the car fuel benefit through payroll, deducting tax in real time through the payroll run rather than via a year-end form.
What's changing from April 2027?
From April 2027, payrolling benefits will become mandatory. P11Ds will no longer be the default. That means if your organisation is still using P11D forms for car fuel benefits, now is a good time to plan the switch to payroll processing—rather than scrambling to meet the deadline.
A lot of payroll teams don’t realise how much lead time this kind of change actually needs. Updating your payroll software configuration, informing employees, and testing the process properly takes time. So, starting now gives you room to do it properly and iron out any issues before mandatory enrolment.
Tax and Class 1A National Insurance on car fuel benefits
Employee income tax
Your employees will need to pay income tax on the company car fuel benefit they receive. The taxable value is calculated using HMRC’s appropriate percentage, which is based on the car’s CO2 emissions. Lower-emission vehicles have a lower percentage; higher-emission vehicles attract a higher one—with the range currently running from 3% to 37%.
This works well for employees driving newer, lower-emission vehicles. But be aware that for higher-emission cars, the tax liability can be significant and it’s worth making sure your people understand what they’re signing up for.
Employer Class 1A National Insurance Contributions
As the employer, you’ll also need to pay Class 1A National Insurance Contributions (NICs) on the value of the car fuel benefit. The current Class 1A NIC rate is 15%. This is reported and paid after the end of the tax year, alongside your P11D(b) submission—unless you’re payrolling benefits, in which case the process works differently.
Worked example: calculating the company car fuel benefit charge
To make things easier, here’s how the numbers work in practice. Meet Sarah. She drives a petrol company car with a list price of £28,000 and CO2 emissions of 120g/km, giving her an HMRC appropriate percentage of 29%.
- Step 1: Calculate the taxable value: Multiply the car fuel benefit multiplier by the appropriate percentage: £29,200 × 29% = £8,468
- Step 2: Calculate Sarah’s income tax: Multiply the taxable value by her 20% basic rate: £8,468 × 20% = £1,693.60 per year (around £141 per month)
- Step 3: Calculate employer Class 1A NICs: Multiply the taxable value by 15%: £8,468 × 15% = £1,270.20 per year
So in 2026/27, Sarah’s fuel benefit costs her £1,693.60 in income tax, and her employer £1,270.20 in Class 1A NICs. If Sarah’s actual private fuel spend is lower than £1,693.60 per year, she’d be better off repaying the fuel herself—more on that in the FAQs below.
How does HMRC calculate their fuel rates?
For context, here’s a brief look at how HMRC arrives at these figures.
- Mean MPG: HMRC starts by determining mean miles per gallon (MPG) based on manufacturer data, adjusted to reflect the distribution of models sold to businesses.
- Applied MPG adjustment: The mean MPG is then reduced by 15% to account for real-world driving conditions.
- Fuel price data: Petrol prices are sourced from the Department for Business, Energy, and Industrial Strategy; LPG prices from the Automobile Association.
- Rate calculation: HMRC uses the adjusted MPG and current fuel prices to set the advisory rates.
Here’s the full breakdown for 2026:
Petrol
| Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Advisory fuel rate |
|---|---|---|---|---|
| Up to 1400 | 50.7 | 132.0 pence | 600.1 pence | 12 pence |
| 1401 to 2000 | 42.8 | 132.0 pence | 600.1 pence | 14 pence |
| Over 2000 | 27.2 | 132.0 pence | 600.1 pence | 22 pence |
Diesel
| Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Advisory fuel rate |
|---|---|---|---|---|
| Up to 1600 | 55.7 | 141.3 pence | 642.2 pence | 12 pence |
| 1601 to 2000 | 49.6 | 141.3 pence | 642.2 pence | 13 pence |
| Over 2000 | 36.6 | 141.3 pence pence | 642.2 pence | 18 pence |
LPG
| Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Advisory fuel rate |
|---|---|---|---|---|
| Up to 1400 | 40.6 | 89.0 pence | 404.6 pence | 10 pence |
| 1401 to 2000 | 34.2 | 89.0 pence | 404.6 pence | 12 pence |
| Over 2000 | 21.7 | 89.0 pence | 404.6 pence | 19 pence |
Record-keeping requirements for fuel benefits
What records do you need?
If your organisation wants to avoid the fuel benefit charge by having employees repay their private fuel costs, HMRC expects solid evidence. That means:
- Detailed mileage logs that clearly distinguish business from personal trips
- Fuel receipts
- Records of any repayments made by employees
Without adequate records, HMRC may apply the fuel benefit charge regardless—and the burden of proof sits with you as the employer. A reliable mileage tracking system isn’t just helpful; it’s your first line of defence if HMRC has questions.
Software like Capture Expense can integrate mileage tracking directly with your payroll software, making sure all of your data is correct, in one place, and ready for processing.
Penalties for incorrect reporting
Getting company car fuel benefits wrong can be expensive. HMRC can charge penalties for inaccurate P11D submissions or incorrect payroll reporting—the amount depends on whether the error is seen as careless, deliberate, or concealed. Interest is also charged on late tax payments, and in more serious cases HMRC may open a formal compliance review covering multiple tax years.
The best way to avoid all of that? Keep accurate records, report on time, and use the correct rates—which is exactly why staying up to date at the start of each new tax year matters.
Handle company car fuel benefits with confidence using Cintra
Managing benefits in kind through payroll—especially with mandatory payrolling on the horizon—is a lot easier when your payroll software is set up to handle it properly. Cintra’s payroll software is built to support UK payroll teams with exactly this kind of compliance work, keeping your processes accurate and your reporting aligned with HMRC requirements.
If you’d like to see how Cintra handles benefits in kind, payroll reporting, and the upcoming shift to mandatory payrolling, book a personalised demo and we’ll walk you through it!
Struggling with expense management as a whole? Our expense management software is here—particularly if your teams are also managing business mileage and employee expense claims alongside company car benefits.
Yes—and for some employees, it's the smarter move. If an employee repays the full cost of all private fuel, the fuel benefit charge doesn't apply. This is known as 'making good' on the benefit, and to avoid the charge entirely the full amount must be repaid by 6 July following the end of the tax year.
It's worth communicating this option clearly—particularly to lower-mileage drivers, who might otherwise end up paying more in tax than the benefit is actually worth to them. Payroll teams are well placed to flag this during benefit review conversations.
It really depends on how much the employee drives and what they spend on fuel. If they cover a lot of miles and fuel costs exceed the value of the benefit charge, it usually works in their favour. For lower-mileage drivers, though, the tax on the benefit could end up costing more than the fuel itself.
Payroll teams can help by running the numbers with employees—or at least pointing them in the right direction so they can make an informed decision. It's always worth doing the maths before assuming it's the right call.
These are two separate charges. The car benefit relates to the private use of the company car itself (based on the car's list price and CO2 emissions). The car fuel benefit is an additional charge that applies specifically when the employer also pays for private fuel. An employee can receive the car benefit without the fuel benefit—for example, if they pay for all their own private fuel.
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