VAT road fuel charges reduced for company cars

Sara White, Editor, Business & Accountancy Daily

Businesses running company cars will see a nearly 6% cut in HMRC’s rates of road fuel charges on VAT returns for new accounting periods from 1 May.

The rate of VAT road fuel scale charges are designed to account for private consumption of fuel on business vehicles and the rates are being reduced from 1 May 2025 for the next 12 months through to 30 April 2026.

HMRC confirmed that ‘the 25/26 road fuel scale charges are lower than the 24/25 figures, the decrease is due to the lower fuel prices at the time of the revalorisation of the figures this year’.

Businesses must use the new scales from the start of the next prescribed accounting period beginning on or after 1 May 2025.

This means that vehicles will see a 5.7% cut from last year’s rates with vehicles with CO2 emissions of 225 or more getting a reduction from £2,454 to £2,314, while the majority of vehicles with CO2 emissions of 120 or less will pay £661, down from £702, while 180 CO2 vehices go down to £1,721 from £1,825 for the VAT inclusive consideration for 12-month prescribed accounting period (see table below).    

It is necessary to work out the correct road fuel charge, based on the company car’s CO2 emissions, and the length of the VAT accounting period. This will be either one, three or 12 months.

The flat rate values apply to one individual, in connection with a specific vehicle, for the relevant accounting period.

Carolyn O'Shea, VAT and indirect tax senior manager said: ‘The VAT road fuel scale charge calculates VAT due to HMRC on road fuel for vehicles used for both business and private purposes. This method allows you to reclaim input tax on fuel without having to keep detailed records of the split of business and private uses of the vehicle.

‘If you purchase fuel solely for business purposes or keep detailed records to apportion the input tax between business and private use you do not need to use the fuel scale charge method.’

But it is important to note that you cannot interchange systems of reporting.

‘If you use the fuel scale charge method, you will need to use it for all cars in which fuel is used for business and private journeys,’ O’Shea warned. ‘You cannot use the scale charge for some cars, but another method, for other cars. However, you do not have to apply the fuel scale charge for cars which are not available for any private use, such as pool cars.’

How the charges stack up

Vehicle’s CO2 emissions	VAT inclusive charge for 12-month prescribed accounting period (£)
	1 May 2025 to 30 April 2026	1 May 2024 to 30 April 2025
120 or less	661	702
125	990	1,050
130	1,059	1,123
135	1,122	1,191
140	1,191	1,263
145	1,255	1,331
150	1,323	1,404
155	1,387	1,471
160	1,456	1,544
165	1,520	1,612
170	1,588	1,685
175	1,652	1,752
180	1,721	1,825
185	1,784	1,893
190	1,853	1,965
195	1,917	2,033
200	1,985	2,106
205	2,049	2,174
210	2,118	2,246
215	2,182	2,314
220	2,250	2,387
225 or more	2,314	2,454