The Government has introduced new VAT road fuel charges, which will affect drivers across the UK.
As of 1 May, the new scale of charges applies, and all business owners must use them when submitting VAT returns to account for private consumption of fuel on a business vehicle.
HM Revenue and Customs (HMRC) said owners will “need to work out the correct road fuel charge, based on your car’s CO2 emissions, and the length of your VAT accounting period”.
The new rates came into force on 1 May and apply until 30 April 2027 as the Government is facing pressure to change its stance on fuel duty due to the ongoing conflict in the Gulf and soaring oil prices.
How it works
Set annually by HMRC, the charges apply to all VAT-registered businesses in the UK, which reclaim VAT on fuel used by company cars for private use.
Business owners have three options when accounting for VAT on road fuel applied to private use. They can:
- Recover no VAT at all
- Maintain accurate mileage records so business and private motoring can be identified and use them to claim only VAT on road fuel used in business journeys
- Recover VAT in full and then pay the road fuel charges
CO2 Emissions
Business owners who choose to go down the third route of reclaiming all VAT on fuel for the vehicle, will need to familiarise themselves with the new set of charges so they can pay the relevant amount.
The correct road fuel charge is based on the car’s CO2 emissions and the length of VAT accounting period, either one, three or 12 months.
The CO2 emissions figure may be specified on a UK approval certificate but can also be checked here.
If the car is too old to have a CO2 emissions figure, the CO2 band will be based on engine size.
If its cylinder capacity is:
- 1,400 or less – use CO2 band 140
- more than 1,400cc but less than 2,000cc – use CO2 band 175
- more than 2,000 cc – use CO2 band 225 or more
Under the new set of charges, vehicles emitting less than 120g of CO2 per km will have a VAT-inclusive charge of £657 for a 12-month period. Charges then increase in bands of 5g per km up to 225g of CO2 per km. Those emitting 225g or more per km will pay a charge of £2,297 for a 12-month period.
Those who choose to do this on a monthly basis would pay £54 on a vehicle emitting less than 120g of CO2 per km, while at the other end of the scale a vehicle emitting 225g or more per km will pay a charge of £190.
The full set of charges based on CO2 emission and VAT accounting period can be found here.