Are you running a business that has a company car fleet? We have some news for you. Starting from June 1st, HMRC has increased its Advisory Fuel Rates (AFRs) quite significantly. For UK-based SMEs, this could be a serious additional cost.
Whether you reimburse employees for business mileage or require them to repay the cost of private fuel usage, these new rates will directly affect your bottom line. Here’s what’s changed, what it means in practice, and how to keep your business moving if the pressure on cash flow becomes too much.
What Are Advisory Fuel Rates?
Advisory Fuel Rates are rates that apply to employees using a company car. They are set by HMRC and reviewed quarterly. They’re used by businesses in two ways:
- Reimbursing employees for business travel in company cars.
- Calculating how much employees must repay for any private mileage driven in a company vehicle.
They’re not mandatory, you can use your own rates if you can demonstrate the actual cost per mile is different. For most businesses though, the HMRC rates are the benchmark.
The New Rates from 1 June 2026
Here’s where things get notable. Compared to the previous rates (1 March to 31 May 2026), the increases are substantial across petrol and diesel:
The following HMRC Advisory Fuel Rates apply to petrol cars from 1st June 2026:
Advisory Fuel Rates 2026 - Petrol cars
| Engine Size | Previous Rate | New Rate (From 1 June 2026) | Increase |
|---|---|---|---|
| Up to 1400cc | 12p per mile | 14p per mile | +2p (+17%) |
| 1401cc - 2000cc | 14p per mile | 17p per mile | +3p (+21%) |
| Over 2000cc | 22p per mile | 26p per mile | +4p (+18%) |
The following HMRC Advisory Fuel Rates apply to diesel cars from 1st June 2026:
Advisory Fuel Rates 2026 - Diesel cars
| Engine size | Previous Rate | New Rate (from 1st June 2026 | Increase |
|---|---|---|---|
| Up to 1600cc | 12p per mile | 15p per mile | +3p (+25%) |
| 1601 to 2000cc | 13p per mile | 17p per mile | +4p (+31%) |
| Over 2000cc | 18p per mile | 23p per mile | +5p (+28%) |
The following HMRC Advisory Fuel Rates apply to LPG (Liquefied Petroleum Gas) cars from 1st June 2026:
Advisory Fuel Rates 2026 - LPG (Liquid Petroleum Gas) cars
| Engine Size | Previous Rate | New Rate (From 1 June 2026) | Increase |
|---|---|---|---|
| Up to 1400cc | 10p per mile | 11p per mile | +1p |
| 1401cc - 2000cc | 12p per mile | 13p per mile | +1p |
| Over 2000cc | 19p per mile | 21p per mile | +2p |
Electric Cars
The electric rates remain unchanged at 7p per mile for home charging and 15p per mile for public charging.
What Does This Mean in Real Terms?
Take a mid-sized business in, say, manufacturing or construction, two sectors where site visits, supplier runs, and client travel are daily occurrences.
Imagine you have five employees each driving 1,500 business miles per month in diesel vehicles with engines between 1601cc and 2000cc. Under the old rate of 13p per mile, your monthly reimbursement bill for those five cars would have been £975. Under the new rate of 17p per mile, that rises to £1,275 per month — an increase of £300 every single month, or £3,600 over the course of a year.
For a business operating on tight margins — particularly in retail, hospitality, or wholesale — that kind of jump can genuinely disrupt your cash flow planning.
And that’s before factoring in that fuel prices themselves have risen sharply, which is precisely why HMRC has raised the advisory rates. The two pressures compound each other.
Who Will Feel This Most?
The industries likely to feel the pinch hardest are those where road travel is non-negotiable:
- Construction — site managers and contracts staff visiting multiple locations daily
- Manufacturing and wholesale — sales reps, account managers, and delivery coordination roles
- Healthcare — mobile practitioners, community care workers, and regional managers
- Retail — area managers and field merchandisers covering multiple sites
- Hospitality — group operations staff and regional support teams
For businesses in these sectors, the jump from the March rates to the June rates isn’t a rounding error — it’s a meaningful operational cost that needs to be absorbed or planned around.
The Bigger Picture: Fuel Costs, Inflation, and SME Finances
HMRC calculates advisory fuel rates using the latest fuel price data from the Department for Energy Security and Net Zero, combined with real-world fleet efficiency figures. When rates jump this sharply in a single quarter, it reflects genuine upward pressure on fuel costs across the board.
For UK SMEs that are already navigating higher wage bills following recent National Living Wage increases, ongoing energy cost pressures, and the impact of wider economic uncertainty, another layer of outgoings is the last thing most businesses need heading into the second half of 2026.
How Capify Can Help
Here’s the thing: a sudden increase in operational costs doesn’t have to derail your business. But it does need to be managed, and as quickly as possible.
At Capify, we specialise in short-term business loans for SMEs across England and Wales. We work with businesses in retail, construction, manufacturing, wholesale, hospitality, and healthcare every day. We understand that your finances don’t always move in neat quarterly cycles, and that unexpected cost increases can leave a gap between what’s going out and what’s coming in.
What makes Capify different?
- Speed: We can get funds into your account fast — far quicker than a traditional high street lender
- Human decisions: Your application is reviewed by a real person who understands your industry, not an automated system that reduces your business to a credit score
- Flexible terms: Our short-term loans are designed to bridge cash flow gaps, not tie you into long-term commitments
- Straightforward process: No lengthy paperwork, no endless back-and-forth
Whether you need to cover a spike in monthly fuel reimbursements, manage cash flow while you adjust your travel policies, or simply give yourself some breathing room during a difficult period, Capify is here to help.
What You Should Do Now
If your business relies on a company car fleet, we’d recommend taking three steps immediately:
- Recalculate your monthly fuel reimbursement liability using the new rates from 1 June 2026.
- Review your travel policy — could some journeys be consolidated, or would a mileage cap make sense?
- Talk to a Capify about a short-term business loan – funds can reach your account faster than a traditional high street lender, with no lengthy paperwork or long-term commitments required.
The new Advisory Fuel Rates have been in effect from 1 June 2026, and HMRC does allow a one-month overlap — meaning you can continue to use the previous rates until 30 June 2026. But from 1 July, the new rates apply in full.
Thinking about a short-term business loan to manage rising costs? Speak to the team at Capify today.
Frequently Asked Questions About Advisory Fuel Rates 2026
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Q: What are the HMRC Advisory Fuel Rates from June 2026?
From 1 June 2026, HMRC increased Advisory Fuel Rates across petrol, diesel and LPG company cars. Petrol cars up to 1400cc are reimbursed at 14p per mile, 1401–2000cc at 17p per mile, and over 2000cc at 26p per mile. Diesel rates are 15p, 17p, and 23p per mile respectively. LPG rates range from 11p to 21p per mile depending on engine size.
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Q: How much have Advisory Fuel Rates increased compared to March 2026?
The increases range from +1p to +5p per mile depending on fuel type and engine size. Diesel saw the largest rises — up to 31% for 1601–2000cc engines. Petrol increases ranged from 17% to 21%. LPG increases were more modest at +1p to +2p per mile.
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Q: Are Advisory Fuel Rates mandatory for UK businesses?
No. Advisory Fuel Rates are not mandatory — businesses can use their own rates if they can demonstrate the actual cost per mile differs. However, HMRC's rates are the standard benchmark used by the majority of UK businesses for company car mileage reimbursement and private fuel repayment calculations.
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Q: Which businesses will be most affected by the June 2026 AFR increase?
Businesses with large company car fleets and high-mileage employees will feel the greatest impact. This includes construction firms, manufacturing and wholesale companies, healthcare providers with mobile teams, retail businesses with area managers, and hospitality groups with regional support staff.
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Q: What can UK SMEs do if the AFR increase creates a cash flow gap?
Businesses facing increased monthly reimbursement costs have several options: recalculate your fuel liability using the new June 2026 rates, review your travel policy to reduce unnecessary mileage, and consider a short-term business loan to bridge the gap while you adjust your budget. Capify provides fast, flexible funding for UK SMEs without lengthy paperwork or long-term commitments.
