If your business reclaims VAT on fuel and any of that fuel goes toward private mileage, HMRC just changed what you owe. The new VAT road fuel scale charges took effect on 1 May 2026 and run through 30 April 2027. Most rates went up. You need to apply the new figures from the start of your next VAT period beginning on or after 1 May.
TL;DR: HMRC's updated VAT fuel scale charges run from 1 May 2026 to 30 April 2027. Rates range from £657/year for low-emission vehicles (120 g/km or under) to £2,297/year for high emitters (225+ g/km). Apply the new scale from your next VAT period starting on or after 1 May. Electric vehicles are excluded entirely.
What Are VAT Fuel Scale Charges?
Fuel scale charges are a flat-rate amount you pay to HMRC when you reclaim VAT on road fuel that includes any private use. Instead of tracking every personal mile, you pay a fixed charge based on the vehicle's CO2 emissions. HMRC publishes new rates annually each May.
The system covers any vehicle where the business pays for fuel and allows private mileage - company cars are the most common example. In our experience, this catches out businesses that provide fuel cards to directors or employees without separating personal journeys.
What Changed on 1 May 2026?
The charges rose across all 25 CO2 bands. Here are the key rates for the period 1 May 2026 to 30 April 2027 (HMRC, 2026):
| CO2 Emissions (g/km) | Annual (VAT incl.) | Quarterly | Monthly |
|---|---|---|---|
| 120 or less | £657 | £163 | £54 |
| 140 | £1,182 | £294 | £98 |
| 150 | £1,314 | £328 | £109 |
| 175 | £1,640 | £409 | £136 |
| 200 | £1,971 | £492 | £163 |
| 225 or more | £2,297 | £574 | £190 |
The full table contains 25 bands at 5 g/km intervals. If your vehicle's CO2 figure falls between bands, round down to the nearest multiple of 5.
Who Needs to Use the Scale Charges?
Any VAT-registered business that reclaims input tax on road fuel where there is an element of private use. That typically means:
- Businesses providing company cars with fuel paid by the employer
- Directors using business fuel cards for personal journeys
- Sole traders claiming all fuel costs through the business but driving for personal reasons too
Businesses with a fleet of 50+ vehicles accounted for over £340 million in fuel scale charge declarations in 2024-25 (HMRC VAT statistics, 2025). Even small fleets of 2-3 vehicles face charges above £3,000 annually for higher-emission models.
Do Electric Vehicles Pay a Scale Charge?
No. Fully electric vehicles are excluded from the fuel scale charge because HMRC's charge specifically covers road fuel - petrol and diesel. If your company car is fully electric and you charge it using a business electricity supply, there is no fuel scale charge to account for.
Plug-in hybrids are a different story. HMRC treats them as petrol or diesel vehicles for scale charge purposes. What we see most often is directors assuming their PHEV is exempt because it has a plug - it is not. The CO2 emissions figure on the V5C determines the band.
What Are Your Three Options for Accounting?
You have three ways to handle VAT on fuel with private use. Each suits different situations:
Option 1: Reclaim all VAT, pay the scale charge. You reclaim 100% of the input VAT on fuel purchases, then account for the appropriate scale charge on your VAT return as output tax. Administratively simple - no mileage records needed. Best when private use is significant.
Option 2: Reclaim no VAT on fuel. You treat all fuel as non-business expenditure. No scale charge applies, but you lose the VAT recovery entirely. This works when vehicles do minimal business miles and the VAT reclaim would be small anyway.
Option 3: Detailed mileage records. You track actual business and personal miles, then reclaim VAT only on the business proportion. No scale charge applies because you are not reclaiming VAT on the private element. One question clients always ask - is the record-keeping worth it? For high-mileage company cars with minimal private use, the savings often justify the admin.
When Do You Apply the New Rates?
From the start of your next VAT return period beginning on or after 1 May 2026. If your quarter started on 1 April 2026, you continue using the old rates for that full quarter and switch to the new rates from 1 July 2026. If your quarter started on 1 May 2026, you apply the new rates immediately.
HMRC confirmed this timing in their official guidance published on 1 May 2026. Getting this wrong is a common trigger for HMRC penalty action and can complicate your year-end accounts.
How Does This Interact with Capital Allowances?
The scale charge is separate from capital allowances on the vehicle itself. You can claim first-year allowances or writing-down allowances on the purchase price of a company car while also accounting for the fuel scale charge on your VAT returns. They serve different purposes - capital allowances reduce your Corporation Tax or Income Tax liability, while the scale charge settles your VAT obligation for private fuel use.
The van benefit charge also increased to £4,170 from 6 April 2026 (HMRC, 2026), which adds to the total cost of providing vehicles to employees.
What Happens If You Get It Wrong?
Using outdated scale charge figures means you are under-declaring output tax on your VAT return. HMRC can assess the shortfall plus interest. For quarterly filers using a vehicle at the 175 g/km band, the difference between old and new rates might be £15-20 per quarter - small individually, but across a fleet and over multiple periods it compounds.
Under Making Tax Digital requirements, your digital records must reflect the correct scale charge figures. Your accounting software should be updated for the new rates, or you'll need to adjust the figures manually at each return.
Frequently Asked Questions
Can I change my accounting method mid-year?
Yes, but only at the start of a VAT period. You cannot switch from scale charges to detailed mileage tracking partway through a quarter. Plan the change to coincide with the start of your next return period and keep records from day one of the new approach.
What if my vehicle has no CO2 figure on the V5C?
Older vehicles without a CO2 rating use engine size as a proxy. HMRC provides a separate lookup table - vehicles with engines up to 1,400cc use the 140 g/km band, 1,401-2,000cc uses the 175 g/km band, and over 2,000cc uses the 225+ g/km band.
Do the charges apply to pool cars?
No, provided the car genuinely qualifies as a pool car under HMRC's rules. That means it is available to multiple employees, not ordinarily kept at anyone's home overnight, and private use is merely incidental. If HMRC challenges the pool car status, the scale charge applies retrospectively.
Are fuel scale charges reclaimable against Corporation Tax?
The scale charge itself is not a deductible expense - it is output VAT you pay on your return. However, the underlying fuel cost (net of VAT) remains a deductible business expense for Corporation Tax purposes to the extent it relates to business use.
Need help updating your VAT returns for the new fuel scale charges? Talk to our team - we handle VAT compliance for businesses across the UK and can review whether the scale charge or mileage tracking is the better option for your fleet.