VAT road fuel scale charge rates to increase from 1 May 2025
Carolyn O’Shea · Posted on: May 1st 2025 · read
Who should read this article?
If your VAT-registered business incurs VAT on motoring expenses, particularly fuel used for both business and private journeys, this article is essential reading. Written by VAT specialists Grace Thompson and Carolyn O’Shea, it outlines upcoming changes to the VAT road fuel scale charge, effective from 1 May 2025, and explains how these changes could impact your VAT recovery and compliance approach.
Motoring expenses and input tax
You can recover VAT incurred on fuel which was purchased for vehicles to the extent that those vehicles are used by the business for making taxable supplies.
If the vehicle is also used for private purposes, the input tax recovery is restricted, or output tax is payable to HMRC as a fuel scale charge.
There are several possible methods to calculate the VAT that you can reclaim on fuel:
- Recover the VAT in full and pay a VAT road fuel scale charge
- Don’t pay the fuel scale charge and recover none of the VAT
- Keep detailed records of the split of business and personal mileage and recover the proportion of VAT which relates to business journeys only
The VAT road fuel scale charge is increasing from 1 May 2025.
What is the VAT road fuel scale charge?
"The VAT road fuel scale charge calculates VAT due to HMRC on road fuel for vehicles used for both business and private purposes. This method allows you to reclaim input tax on fuel without having to keep detailed records of the split of business and private uses of the vehicle."
Under the fuel scale charge method, you should:
- Recover the VAT you pay on fuel as input tax in full
- Determine the fuel scale charge rate applicable to the vehicle. This is a flat-rate amount which is deemed to represent the proportion of the fuel which is used for private purposes. It is based on the vehicle’s CO2 emissions and the length of your VAT accounting period. By ‘VAT accounting period’, this refers to whether you complete monthly, quarterly, or annual returns
- Pay the fuel scale charge on your VAT return via box 1 (output tax)
If you purchase fuel solely for business purposes or keep detailed records to apportion the input tax between business and private use you do not need to use the fuel scale charge method.
If you use the fuel scale charge method, you will need to use it for all cars in which fuel is used for business and private journeys. You cannot use the scale charge for some cars, but another method, for other cars. However, you do not have to apply the fuel scale charge for cars which are not available for any private use, such as pool cars.
Fuel provided for a business van is not subject to the fuel scale charge and can often be recovered in full. However, if private use of the van is more than insignificant, HMRC will expect you to make a reasonable estimate of the proportion of fuel used for private use and restrict that percentage of input tax.
What’s changing?
The VAT road fuel scale charge rates will increase with effect from 1 May 2025. You should use the new rates from the start of the next prescribed accounting period beginning on or after 1 May 2025. If your VAT return quarter starts prior to 1 May 2025, you should continue to use the previous rates for this return and use the new rates from the start of the next VAT return period.
The new rates can be found here: VAT road fuel scale charges from 1 May 2025 to 30 April 2026 - GOV.UK
What should you do?
- Review your accounting software to ensure it is compatible with the new rates
- Determine if the output tax payable on the vehicles outweighs the benefit of recovering the VAT on the fuel purchase.
- Get in touch with the MHA VAT team if you have any questions or would like personalised guidance.
