HMRC cuts Advisory Fuel Rates across the board

Company Fleet  Driver Guides  HMRC / Tax 

Company car drivers claiming back the cost of fuel for business mileage from their employers can expect to be paid less from September.

The latest Advisory Fuel Rates (AFRs) published by HM Revenue and Customs introduce cuts of 1 pence per mile for most drivers, including those in electric vehicles; cars with larger engines have a 2ppm reduction.

The reimbursement rates are intended to track rises and falls in energy prices and electric vehicles have seen the biggest reduction over the past few months, down 30% from a 10ppm high at the beginning of December 2023.

Falling EV rates continue to draw criticism from some drivers and analysts because the rate does not cover the cost of plugging in at public charging points.

According to data from Zapmap, average public recharging rates for slower chargers are 57p/kWh. For a rapid charger, the cost is 80p/kWh.

This equates to 14-20 pence per mile for a driver achieving 4 miles/kWh.

The average domestic electricity rate is 22p/kWh, costing the same driver 5.5p per mile if they charged their vehicle at home.

The fuel rates only apply to employees using a company car. They can be used by companies to reimburse drivers for business travel or to arrange repayment from drivers for their private mileage.

If a fleet is more fuel efficient, or the cost of business travel is higher than the guideline rates, companies can use their own rates.

Should a company pay more than the guideline rate, it must be able to prove its fuel cost per mile is higher. If it can’t, then it will have to treat any excess payment as taxable profit and as employee earnings for National Insurance purposes, but there is no fuel benefit charge.

Similarly, there is no fuel benefit charge if a company uses a lower mileage rate when employees repay private fuel, if it can be shown that the full cost of fuel is covered.

New AFRs from 01 September 2024

Petrol (inc. hybrid): engine size (cc)	Advisory Fuel Rate
1400cc or less	13p (decrease of 1p)
1401cc to 2000cc	15p (decrease of 1p)
Over 2000cc	24p (decrease of 2p)

Diesel (inc. hybrid): engine size (cc)	Advisory Fuel Rate
1600cc or less	12p (decrease of 1p)
1601cc to 2000cc	14p (decrease of 1p)
Over 2000cc	18p (increase of 2p)

Fully electric	Advisory Fuel Rate
All cars	7p (decrease of 1p)

Source: HMRC - visit www.gov.uk/guidance/advisory-fuel-rates

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