If you’re weighing up a vehicle purchase or lease for the business, two separate things landed at the same time this quarter — one small and immediate, one bigger and further off. Worth knowing the difference before you sign anything.
The small, immediate one: fuel rates just moved
HMRC’s Advisory Fuel Rates (AFRs) — the rates used to reimburse company car drivers for business mileage, or to work out repayments for private fuel use — updated from 1 September 2026. The changes are minor, but if you run any company vehicles, your payroll or expenses process should reflect them from this date:
| Engine size | Petrol | Diesel | LPG |
|---|---|---|---|
| 1400cc or less | 14p | — | 11p |
| 1600cc or less | — | 15p | — |
| 1401–2000cc | 17p | — | 13p |
| 1601–2000cc | — | 16p | — |
| Over 2000cc | 27p | 22p | 20p |
Electric remains unchanged: 7p/mile for home charging, 15p/mile for public charging.
Petrol on larger engines nudged up a penny; diesel and LPG on the larger bands each came down a penny. Everything else held steady — HMRC itself is calling this a fairly static quarter. It’s a small change, but using the wrong AFR after 1 September can create tax and National Insurance complications on either side (under-reimbursing staff, or over-reimbursing in a way that counts as a taxable benefit), so it’s worth a two-minute check even though the numbers barely moved.
The bigger, further-off one: the Budget
The Autumn Budget lands on 28 October 2026, and vehicle and equipment purchases are exactly the kind of decision that can get caught out by tax changes announced with little notice. Capital allowances, in particular, are worth understanding now regardless of what the Budget does or doesn’t change:
- Buying (including hire purchase): most commercial vehicles qualify for the Annual Investment Allowance, letting you deduct the full purchase price from taxable profits in the year of purchase, up to the annual limit. The catch with hire purchase specifically: you can’t claim the allowance until you actually own the vehicle, which under a hire purchase agreement is only after the final payment — not when you take delivery.
- Leasing (contract hire): no capital allowances, because you never own the asset — but VAT-registered businesses can reclaim VAT on the monthly payments throughout the contract, which spreads the cash flow impact rather than requiring it upfront.
- Cash flow shape: buying typically means a larger upfront cost (deposit plus VAT) in exchange for eventually owning an asset outright; leasing means smaller, predictable monthly payments with no asset on the books and less flexibility if you want to exit early.
What to actually do
Don’t try to out-guess the Budget — nobody outside the Treasury knows yet whether capital allowance rules will move on 28 October, and purchases already under way won’t usually be caught retroactively. The more useful move is to get your current numbers straight first: know whether AIA headroom is available this year, understand the hire purchase ownership-timing issue if that’s your route, and decide buy-vs-lease based on your actual cash flow position rather than a guess about the Budget. If a purchase is close to the finish line, there’s little to gain from delaying it on Budget speculation alone — but if it’s not urgent, it’s a reasonable enough gap to get an accountant’s read on your specific numbers before committing either way.
Sources: HMRC Advisory Fuel Rates (GOV.UK, effective 1 September 2026); Leasing vs Buying Vans for Business (OVL Group); Budget 2026: Key Details.
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