Last updated: 16 October 2026
What is the fuel duty rate in 2026?
Fuel duty on petrol and diesel is 52.95p per litre until 31 December 2026. This includes the temporary 5p cut first introduced in March 2022. The government extended the cut in May 2026. Under current law, duty rises to 55.95p on 1 January 2027 and to 57.95p on 1 March 2027, though the government has said it will confirm final rates at Budget 2026. VAT at 20% is charged on top of the duty and the fuel price.
The 10p fuel tax proposal
In 2025, businessman John Caudwell urged the Chancellor to add 10p a litre to fuel duty instead of raising other taxes. He argued that pump prices had fallen and that a rise could raise around £20 billion. The government did not adopt the idea. Instead, the 2025 Budget kept the 5p cut for longer and set out a gradual return to pre-2022 rates.
Fuel duty timeline
| Date | Main rate per litre |
| 23 March 2022 to 31 December 2026 | 52.95p |
| From 1 January 2027 | 55.95p (planned) |
| From 1 March 2027 | 57.95p (planned) |
Electric vehicles
Electric cars pay no fuel duty. From 1 April 2028, the government plans an Electric Vehicle Excise Duty (eVED) charged per mile: 3p a mile for fully electric cars and 1.5p for plug-in hybrids, on top of vehicle excise duty and rising with inflation from 2029/30, as set out in the government’s eVED policy paper on gov.uk.
What it means for businesses
- VAT: VAT-registered businesses can reclaim VAT on fuel for business use. If fuel is also used privately, you either reclaim only the business share or reclaim it all and pay the fuel scale charge.
- Mileage allowance: employees using their own cars can be paid 55p a mile for the first 10,000 business miles and 25p after that, tax-free. The 55p rate (up from 45p) applies from 6 April 2026, backdated, according to HMRC.
- Company cars: from 1 September 2026, HMRC’s advisory fuel rates are 14p, 17p and 27p a mile for petrol cars by engine size, 15p, 16p and 22p for diesel, and 7p (home charging) or 15p (public charging) for electric cars.
- Fuel benefit: free private fuel in a company car is taxed using the £29,200 fuel benefit multiplier for 2026/27.
Example
A plumber drives 15,000 business miles a year in his own van as a sole trader. If he uses simplified expenses, he claims 55p for the first 10,000 miles and 25p for the next 5,000, a total of £6,750 for 2026/27, regardless of what he spends on fuel. If he claims actual costs instead, higher fuel duty increases his deductible expenses.
Planning for higher fuel costs
Review your mileage claims and vehicle choices before the 2027 increases. Many businesses find that switching to electric vans or cars cuts running costs and tax, because zero-emission company cars have a low benefit in kind rate and qualify for a 100% first-year allowance.
Frequently asked questions
Is fuel duty charged on red diesel?
A lower rebated rate applies, but most businesses can no longer use red diesel since April 2022.
Does fuel duty apply to home heating oil?
No, kerosene for heating is not subject to the main rate.
Can I claim fuel duty back?
Not separately. It is part of the fuel cost you deduct as a business expense.
Has the mileage rate changed?
Yes. The rate for the first 10,000 miles rose from 45p to 55p from 6 April 2026 for both employees and sole traders using simplified expenses. The government is reviewing the rates beyond 2026/27.
Related: motoring expense records, advisory fuel rates and EV charging tax treatment.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with motoring costs and business tax. See our small business accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
