Fuel duty and VAT fuel charges: the latest news for drivers

What’s changing: The UK government has extended the 5p cut in fuel duty for the rest of 2026, saving the average driver £120 over two years. Additionally, HMRC has updated the VAT road fuel scale charges for 1 May 2026 to 30 April 2027, with annual costs ranging from £657 to £2,297 based on your vehicle’s CO2 emissions.

If you’re a small business owner who drives for work, it’s important to stay up to date with the latest rules and regulations. And with rising operational costs across the UK, any changes to driving taxes can add unexpected costs to your finances.

We’ve broken down the latest updates to fuel duty and VAT to help you see the big picture. Here’s everything you need to know about the latest government announcements.

Fuel duty freeze extended for 2026

Prime Minister Keir Starmer has announced the government is no longer planning to raise fuel duty this year. This measure aims to protect households and businesses from rising fuel costs.

How will the fuel duty freeze affect small business owners?

According to a Treasury announcement in May 2026, freezing this tax will save the average driver £120 over a two-year period.

The government also introduced a 12-month vehicle tax holiday specifically for the haulage industry. The Treasury states that this pause on vehicle excise duty will save a typical heavy lorry £600.

This is a welcome tax break for businesses trying to navigate market challenges and maintain their profit margins.

New VAT road fuel scale charges for 2026

HMRC has confirmed the new VAT road fuel scale charges that apply from 1 May 2026 to 30 April 2027. These charges let businesses reclaim all VAT on fuel without keeping detailed private mileage records. Instead, you pay a fixed amount (based on your CO2 emissions) in your VAT return to account for fuel bought by the business but used for private journeys.

How will the VAT road fuel scale charges affect small business owners?

According to HMRC guidelines from 2026, the exact charge depends entirely on your vehicle’s CO2 emissions. Vehicles emitting 120g of CO2 per kilometre or less will incur a charge of £657 for the 12-month period. Vehicles in the highest band of 225g per kilometre or more face a charge of £2,297.

You have the flexibility to account for these charges annually, quarterly, or monthly. You can choose the monthly option if maintaining steady cash flow matters more than reducing administrative paperwork.

Keep your business moving forward

Staying informed about government policy changes is the best way to help protect your business. By understanding these new driving updates, you can forecast your vehicle expenses and make more informed decisions.

Remember to update your accounting software with the new HMRC scale charges before your next tax return.

Frequently asked questions about driving in 2026

Who’s eligible for the vehicle tax holiday?

The 12-month vehicle tax holiday applies specifically to hauliers operating heavy goods vehicles. This relief helps logistics companies and fleet operators manage their operational costs amid rising global fuel prices.

How do I calculate my VAT road fuel scale charge?

You can calculate your charge based on your vehicle’s official CO2 emissions figure. You can find this number on your vehicle logbook. Once you have the figure, match it to the HMRC emissions bands to find your specific charge for the accounting period.

Can I reclaim VAT without using the scale charge?

Yes, you can reclaim value added tax on fuel used strictly for business purposes without using the scale charge. However, you must keep detailed mileage records to prove that no fuel was used for private journeys.

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