On May 1, 2026, new VAT rates for HMRC road fuel scale charges came into effect, impacting thousands of drivers across the UK. The changes mean that vehicles emitting less than 120 grams of CO2 per kilometer will face a VAT-inclusive charge of £657 for the year.
As the government aims to encourage lower emissions, the VAT-inclusive charge increases in bands of 5g/km. For vehicles emitting 225g/km or more, the charge skyrockets to £2,297. This adjustment is part of an annual review by HMRC, which updates these rates every May.
Drivers need to navigate these new rules carefully. They can either recover VAT in full, not recover any at all, or track their mileage to recover a portion based on business versus personal use. It’s crucial for businesses to understand how these rates will affect their accounting practices.
Key details about the new VAT rates:
- Vehicles under 120g/km CO2: £657 per year
- Vehicles at or above 225g/km CO2: £2,297 per year
- CO2 emissions increase in increments of 5g/km
- Engine sizes determine CO2 bands for vehicles without emissions figures
- Engines of 1,400cc or less fall under the 140g/km band
- Engines between 1,400cc and 2,000cc fall under the 175g/km band
Officials have urged drivers to familiarize themselves with these changes. “Drivers are being urged to familiarise themselves with new HMRC rates,” a spokesperson said, noting that the new VAT fuel rates will remain in place until April 30, 2027.
The implications are significant — especially for businesses heavily reliant on vehicle use. With rising fuel pricing and stricter emission standards, many companies may find their operational costs increasing dramatically.
As HMRC continues to adjust these rates annually, stakeholders are left pondering how future adjustments might look. The expectation is clear: understanding these changes is essential for compliance and financial planning.
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