Can I Claim Fuel Costs as a Business Expense?
Business fuel yes. Personal fuel in a company car creates an additional (expensive) fuel benefit.
What HMRC Says
Fuel for business travel is deductible. If company pays for private fuel in a company car, there's an additional fuel benefit charge.
When You Can Claim
- Fuel for business journeys in company vehicle
- Fuel receipts for business mileage in personal car (alternative to mileage rate)
- 100% business-use vehicle fuel
When You Cannot Claim
- Private mileage fuel
- Commuting fuel
- Personal use of company car fuel (without fuel BIK)
Good to Know
Pro tip: For company cars, don't take free private fuel - the BIK is rarely worth it unless you do huge private mileage
Understanding Fuel Costs Expenses
Fuel costs through your limited company depend entirely on whether you are using a company car, a personal car with mileage claims, or a commercial vehicle. Each has different rules, and the fuel benefit charge on company cars is one of the most expensive traps in UK tax.
For a personal car used for business, you have two options. The simplest and usually most efficient is to claim mileage at HMRC's approved rates: 45p per mile for the first 10,000 business miles and 25p per mile thereafter. This rate covers fuel, insurance, depreciation, and all running costs in one claim. Alternatively, you can claim actual fuel costs for business journeys, but this requires meticulous record-keeping and is usually less generous than the 45p rate. You cannot use both methods, so pick one and stick with it for the tax year.
For company cars, the company can pay for business fuel and claim it as a deductible expense. However, if the company also pays for your private fuel (including commuting), this triggers the fuel benefit charge. For 2025/26, the fuel benefit multiplier is £27,800. This is multiplied by the same CO2-based percentage used for the car BIK. A car with a 33% BIK rate would generate a fuel benefit of £9,174, on which a 40% taxpayer pays £3,670 in income tax annually.
The fuel benefit is a fixed charge based on the car's emissions, not on how much private fuel you actually use. Whether you drive 2,000 private miles or 20,000 private miles, the fuel benefit is the same. This makes it economically disastrous unless you drive enormous private mileage. For most directors, it is far cheaper to reimburse the company for any private fuel or to pay for private fuel personally.
For commercial vehicles (vans), the rules are more generous. The van fuel benefit for private use is a flat £757 for 2025/26, regardless of the van's value or how much private fuel is used. This is dramatically cheaper than the car fuel benefit.
VAT recovery on fuel is complex. If you reclaim all VAT on fuel, you must account for the private use element using HMRC's fuel scale charges, which are based on CO2 emissions. Many small companies find it simpler to only reclaim VAT on fuel that can be clearly identified as business use, keeping business and private fuel receipts separate.
Real-World Examples
Personal car with mileage rate
Helen uses her own BMW for 7,000 business miles per year. Her company reimburses her at 45p per mile, totalling £3,150 per year tax-free. She pays for all fuel personally and the mileage rate covers fuel plus wear and tear. No fuel BIK applies.
Company car with private fuel benefit
A director has a company car with CO2 emissions of 120g/km (30% BIK rate). The company provides a fuel card for all travel. The fuel benefit is 30% of £27,800 = £8,340. At 40% tax, the director pays £3,336 per year just for the fuel benefit. Unless the director drives over 15,000 private miles, this is not worth it.
Company car - business fuel only
A director keeps detailed records separating business and private mileage. The company only pays for business fuel, and the director pays personally for private fuel. No fuel benefit charge applies. The director saves thousands in tax compared to taking free private fuel.
Company van fuel
A tradesperson has a company van and the company pays for all fuel. The van fuel benefit is only £757 for the year (flat rate), costing a 40% taxpayer £303 in tax. This is far cheaper than the equivalent car fuel benefit.
Common Mistakes to Avoid
- Accepting company-paid private fuel in a company car without calculating the fuel benefit charge - for most directors, the BIK far exceeds the value of the free fuel.
- Claiming both mileage rates and actual fuel costs for the same vehicle - you must choose one method and use it consistently.
- Not keeping a mileage log to separate business and private fuel when using a company car, which means HMRC will assume all fuel includes a private element.
- Forgetting that the 45p mileage rate covers all motoring costs including fuel, so you cannot claim fuel separately on top of mileage.
Frequently Asked Questions
Should I accept free private fuel in my company car?
Almost certainly not. The fuel benefit charge is a fixed amount based on your car's emissions, not your actual private mileage. Unless you drive very high private miles (typically 15,000+), you will pay more in tax than the fuel is worth. Reimburse the company for private fuel instead.
Can I claim 45p per mile AND fuel receipts?
No. The 45p per mile HMRC approved rate is designed to cover all motoring costs including fuel, insurance, depreciation, and maintenance. You cannot claim fuel receipts separately on top of the mileage allowance. Choose one method and apply it consistently.
What are the HMRC advisory fuel rates for company cars?
HMRC publishes advisory fuel rates quarterly. For 2025/26, typical rates are: petrol 1400cc or less 14p/mile, 1401-2000cc 16p/mile, over 2000cc 26p/mile. Diesel rates are similar. Electric vehicles are 7p per mile. These rates are used for reimbursing business fuel in company cars, not personal cars.
Can I reclaim VAT on fuel?
You can reclaim VAT on fuel only for business mileage. If you reclaim all VAT on fuel (including private), you must apply HMRC's fuel scale charges on your VAT return to account for the private use. Many small companies find it simpler to only reclaim VAT on clearly business-only fuel purchases.
Source: HMRC Employment Income Manual EIM25500 onwards - Car fuel benefit, and HMRC Advisory Fuel Rates published quarterly
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