The UK has introduced new VAT road fuel scale charges and revised vehicle tax rates, affecting petrol and diesel drivers from May 2026. The measures, set by HM Revenue & Customs (HMRC) and the Driver and Vehicle Licensing Agency (DVLA), will remain in force until April 2027.
These changes come alongside rising fuel prices and ongoing scrutiny of fuel markets. Together, they shape the cost of driving for both private motorists and businesses using company vehicles.
Updated VAT Fuel Scale Charges Reshape Business Vehicle Costs
New VAT road fuel scale charges came into effect on May 1, 2026, applying to fuel used for private journeys in business vehicles. These fixed charges allow businesses to reclaim VAT on fuel without maintaining detailed mileage records, instead applying a standardised cost based on emissions.
According to HMRC guidance reported by GB News, vehicles emitting 120g of CO2 per kilometre or less are assigned a VAT-inclusive value of £657 for a 12-month accounting period. Charges then increase in bands of 5g/km, reaching £2,297 for vehicles emitting 225g/km or more.
The system offers flexibility. Businesses can choose to reclaim all VAT and apply the scale charge, reclaim none, or calculate a split between business and private use. According to HMRC statements, the scheme is designed to simplify accounting while ensuring private fuel use is taxed appropriately.
For older vehicles without official emissions data, HMRC applies proxy bands based on engine size. Engines of 1,400cc or less are treated as 140g/km, those between 1,400cc and 2,000cc as 175g/km, and engines above 2,000cc fall into the highest category. The rates will remain unchanged until April 30, 2027. HMRC advises businesses to calculate the proportion of the accounting period covered and apply the charge accordingly, ensuring accurate VAT reporting.
Vehicle Tax Rises and Fuel Prices Add Pressure on Motorists
Alongside VAT changes, standard vehicle excise duty (VED) rates have increased. From April 1, 2026, the annual tax for petrol, diesel and hybrid cars registered after April 2017 has risen to £200, up from £195. According to RAC figures cited by the Express, drivers paying via monthly instalments will pay a total of £210 per year.
Additional costs apply to higher-value vehicles. Cars originally priced above £40,000 incur an extra £440 annual charge, bringing the total to £640. This “expensive car supplement” continues to affect a segment of newer vehicles, including some electric models depending on price thresholds.
At the same time, fuel prices have risen sharply. According to the Competition and Markets Authority (CMA), average petrol prices increased by 26p per litre and diesel by 50p between February and April 2026. The regulator attributes much of this rise to higher oil prices linked to geopolitical tensions in the Middle East.
The CMA notes that while most retailers maintained stable margins, a minority increased them. It has committed to further investigation. According to statements from CMA chief executive Sarah Cardell, the organisation aims to ensure that any reductions in wholesale costs are passed on to consumers.
Drivers are being encouraged to compare prices using the government’s Fuel Finder scheme. The CMA estimates that shopping around could save up to £9 per tank, reflecting growing price variation across forecourts. Taken together, the tax adjustments and fuel price trends indicate a more complex cost environment for UK drivers. Businesses and households alike are being urged to review their expenses and understand how the new measures apply to their vehicles.
