Fuel & motoring costs

Conditions

• Sole traders and partnerships claiming actual vehicle running costs can deduct the business proportion of fuel, servicing, road tax, insurance, MOT and repairs. The deductible amount is determined by multiplying the total cost by the fraction of business mileage to total mileage. Any private-use proportion is not deductible.
• Sole traders and partnerships who use the simplified mileage (AMAP) rate instead — 55p/mile for the first 10,000 business miles in 2026/27, then 25p/mile — cannot also claim fuel or any other running costs separately for that vehicle. The mileage rate is an all-in rate covering fuel, servicing, insurance and depreciation. You must choose one method per vehicle and use it consistently for the life of that vehicle.
• For a limited company, the cost of fuel for vehicles owned or leased by the company is an allowable business expense for corporation tax purposes. Where a company car is also available for the private use of a director or employee, no additional restriction applies to the company's fuel deduction — but if the company also pays for private fuel in the company car, a separate taxable fuel benefit arises on the employee or director.
• Where an employee or director uses their own car for business journeys and is reimbursed by their employer, the approved mileage allowance payment (AMAP) rates apply: 55p/mile for the first 10,000 business miles, 25p/mile thereafter (2026/27). Payments within these limits are not subject to income tax or NIC. If the employer pays below the AMAP rate, the employee can claim tax relief on the shortfall through Self Assessment or a P87.
• For company car drivers reimbursed by their employer for business fuel costs, HMRC's advisory fuel rates (AFRs) apply, not AMAP. The AFRs are reviewed and updated quarterly and vary by fuel type and engine size. As of 1 June 2026 the rates range from 14p/mile (petrol, up to 1400cc) to 26p/mile (petrol, over 2000cc), from 15p/mile (diesel, up to 1600cc) to 23p/mile (diesel, over 2000cc), and 7p/mile for electric vehicles charged at home or 15p/mile charged at a public charger. LPG rates also apply. Always check the current GOV.UK page for the most recent quarterly rates before making or reimbursing a claim.
• If a company provides free private fuel to an employee or director in a company car (rather than limiting reimbursement to business miles), a fuel benefit charge arises in addition to the company car benefit. The fuel benefit is calculated as a fixed statutory multiplier (set by HMRC and updated annually) multiplied by the same CO2-based appropriate percentage used for the car benefit. Once private fuel is provided, the full fuel benefit charge applies for the whole tax year — there is no partial exemption for months when private fuel was not provided. For this reason, many employers choose not to provide private fuel.
• Other allowable motoring costs under the actual-costs method include servicing and repairs, road tax (vehicle excise duty), MOT fees, parking for business purposes, and breakdown cover — always restricted to the business proportion for a vehicle with any private use.

Common mistakes

• Claiming fuel costs separately on top of the mileage rate for the same vehicle — the mileage rate already includes fuel and no additional deduction is permitted.
• Providing a blanket company fuel card to cover all journeys including commuting and personal trips, then not accounting for the fuel benefit charge that arises.
• Using an out-of-date advisory fuel rate — HMRC updates these quarterly, and using a stale rate can lead to over-reimbursement (creating a taxable benefit) or under-reimbursement (employee can claim tax relief on shortfall).
• Claiming the full fuel cost on a business vehicle that is also used privately, without apportioning for the private mileage.

What to keep

• Fuel receipts or credit card records showing amounts and dates.
• A mileage log showing business and private journeys, to support the apportionment under the actual-costs method or to verify AMAP claims.
• For company car reimbursements: a record of business miles driven and the advisory fuel rate applied.

Real-world example

A sole trader drives 12,000 business miles in 2026/27 in her own car. Using the mileage method: she claims 10,000 × 55p = £5,500, plus 2,000 × 25p = £500, totalling £6,000. She does not claim fuel separately. A limited company director drives the same mileage in a company petrol car (1,600cc engine): the company reimburses him at the advisory fuel rate of 17p/mile (1 June 2026), giving £2,040 tax-free — this is separate from his company car benefit-in-kind.

Frequently asked

Related allowances