New VAT rates for road fuel charges took effect on May 1, 2026, impacting thousands of drivers across the UK. The changes will remain in place until April 30, 2027, and could significantly alter how businesses account for their vehicle fuel expenses.
Key details:
- Vehicles emitting less than 120g of CO2 per kilometre will incur a VAT-inclusive charge of £657 for a full year.
- The charge increases in bands of 5g/km, reaching up to £2,297 for vehicles that emit 225g/km or more.
- Drivers can recover VAT in full, not recover any VAT, or track the split between business and personal mileage to recover VAT partially.
- For vehicles without a specified CO2 emissions figure, the band is determined by engine size — engines of 1,400cc or less fall under the 140g/km band.
- Engines above 1,400cc but below 2,000cc fall under the 175g/km band.
HMRC has emphasized that drivers should familiarize themselves with these new rates. “Drivers are being urged to familiarise themselves with new HMRC rates,” officials stated. This could impact thousands across the UK as businesses adapt to the updated regulations.
Each year, HMRC reviews and updates VAT rates for road fuel charges. This year’s adjustments reflect ongoing efforts to encourage lower CO2 emissions through differentiated pricing based on vehicle emissions. As environmental concerns grow, these changes align with broader initiatives aimed at reducing carbon footprints across various sectors.
Despite these updates, some uncertainties linger. Observers note that no specific timeline has been shared regarding future adjustments beyond April 2027. Understanding how these rates will evolve remains a priority for many drivers and businesses alike.
