HM Revenue and Customs (HMRC) has announced updated Value Added Tax (VAT) road fuel scale charges that will affect UK businesses operating older petrol and diesel vehicles. These new rates, confirmed on May 1, 2026, will be in effect until April 30, 2027, impacting how businesses account for fuel used privately in company vehicles.

Understanding Road Fuel Scale Charges

Road fuel scale charges are a standardized amount determined by HMRC that businesses add to their VAT returns. This mechanism is used to account for the private use of fuel in vehicles that are used for business purposes. HMRC revises these charges annually, with the latest adjustments taking effect from May 1st each year. The charges are fixed amounts, irrespective of the actual private mileage driven, and are categorized based on a vehicle’s CO2 emissions.

How the Charges Work

Businesses must calculate the appropriate road fuel charge based on their vehicle’s CO2 emissions and the duration of their VAT accounting period, which can be monthly, quarterly, or annually. These charges are then reported in Box 1 of the VAT return.

The scale charges are structured in bands corresponding to CO2 emissions per kilometre (g/km). For the period May 1, 2026, to April 30, 2027, the VAT-inclusive charges range:

• £657 for vehicles emitting 120g/km or less (for a 12-month period).
• £2,297 for vehicles emitting 225g/km (for a 12-month period).

These figures represent the maximum and minimum charges for a full 12-month accounting period, with corresponding rates applicable for quarterly and monthly periods. The charges increase incrementally with higher CO2 emission bands.

Special Provisions for Older Vehicles

A significant consideration for businesses using older petrol and diesel cars is that these vehicles may not have an official CO2 emissions figure recorded. This typically applies to vehicles registered before March 1, 2001.

For such vehicles, HMRC requires businesses to determine the applicable CO2 band based on the car’s engine size, or cylinder capacity, instead of a CO2 figure. This ensures that even older vehicles are subject to appropriate fuel scale charges.

Determining CO2 Bands by Engine Size

HMRC provides guidance on how to ascertain the CO2 band for vehicles lacking an official emissions figure. The cylinder capacity, measured in cubic centimetres (cc), is used to place the vehicle into a specific CO2 emission band. For example:

• Vehicles with a cylinder capacity of 1400cc or less fall into the lowest CO2 band.
• Vehicles with a cylinder capacity between 1401cc and 2000cc fall into the next band.
• Vehicles with a cylinder capacity exceeding 2000cc are placed in the highest band.

The V5 registration document (logbook) for vehicles registered after March 1, 2001, typically includes the CO2 emissions figure. However, for cars registered earlier, this information may not be present, necessitating the use of engine size as a proxy.

Accounting for Fuel Charges and VAT Recovery

Businesses have several options for accounting for road fuel scale charges and recovering VAT:

• Full VAT Recovery: Businesses can recover all input VAT on fuel purchases and then pay the applicable road fuel scale charge.
• No VAT Recovery: Alternatively, businesses can choose not to recover any VAT on fuel and avoid paying the scale charge.
• Partial Recovery: Businesses can meticulously track business versus private mileage to recover a proportion of the VAT on fuel, aligning the VAT recovery with actual business use.

When a vehicle is used for only part of an accounting period, the scale charge must be adjusted proportionally. Businesses need to calculate the percentage of the accounting period the car was in use and apply this to the relevant annual, quarterly, or monthly charge to determine the correct amount payable.

HMRC’s Confirmed Rates (May 1, 2026 – April 30, 2027)

HMRC has detailed the specific road fuel scale charges for the period. These rates are designed to reflect the varying levels of private fuel consumption associated with different vehicle emission levels. The exact charges for each CO2 band and accounting period are available in HMRC’s official guidance.

For instance, a 12-month period sees charges escalating with CO2 emissions. A vehicle emitting between 121-140g/km would incur a higher charge than one emitting 120g/km or less. Similarly, vehicles in higher emission brackets, such as those emitting over 200g/km, face the most substantial charges. The same tiered structure applies to three-month and one-month accounting periods, scaled down accordingly.

Conclusion

The updated VAT road fuel scale charges from HMRC represent an important compliance requirement for businesses operating company vehicles, particularly those utilizing older petrol and diesel cars. Understanding how to determine the correct charge, especially for vehicles without official CO2 figures, and choosing the most appropriate VAT recovery method are crucial steps. Businesses are advised to consult HMRC’s official publications for the precise rates and detailed guidance applicable to their specific circumstances to ensure accurate VAT reporting and compliance.