New VAT rates for road fuel charges have been introduced by HMRC, significantly impacting thousands of drivers in the UK. These changes took effect on May 1, 2026, and will remain in place until April 30, 2027.
The new VAT-inclusive charge for vehicles emitting less than 120g of CO2 per kilometre is set at £657 for a 12-month period. This charge increases in increments of £5 for every additional 5g/km of CO2 emissions, reaching a maximum of £2,297 for vehicles emitting 225g/km or more.
Drivers have different options regarding VAT recovery depending on their vehicle usage. They can recover VAT in full if the vehicle is used solely for business, not recover any VAT if it’s used exclusively for personal purposes, or track the split between business and personal mileage to recover VAT partially. HMRC advises that drivers should calculate how much of the accounting period is used for business and record it as a percentage.
For vehicles without a specified CO2 emissions figure, HMRC determines the emissions band based on engine size. Engines of 1,400cc or less fall under the 140g/km band, while those between 1,400cc and 2,000cc are classified under the 175g/km band.
HMRC updates these VAT rates annually, which means that drivers must stay informed about any future changes that may affect their fuel pricing and tax obligations. The introduction of these new rates has prompted officials to urge drivers to familiarize themselves with the implications.
The next update is expected to occur in May 2027 when HMRC will review and potentially adjust these rates again. Observers note that understanding these changes is crucial for drivers managing their business vehicle fuel consumption effectively.
