TTR Barnes

On 1st of September 2024, new advisory fuel rates for company cars were introduced by HMRC. First published in August this year, the new rates have seen a decrease for petrol and diesel engines, as well as fully electric cars. Liquefied petroleum gas (LPG) engines’ rates, meanwhile, have not seen any change from the previous quarter.

The new advisory fuel rates (also known as AFRs and HMRC company car mileage rates), introduced to reimburse employees who travel for business, come off the back of a reduced trend in both petrol and diesel prices.

What are the new advisory fuel rates?

Based on prices taken from the Department for Energy Security and Net Zero (DESNZ), the HMRC’s advisory fuel rates for both petrol and diesel cars have fallen by 1pence per mile (ppm), with petrol rates now at 15ppm and diesel rates now at 14ppm.

Lager engines sizes, such as those over 2000cc, have seen a 2ppm reduction to 24ppm for petrol engines and 18ppm for diesel engines.

Fully electric car users have also seen a 1ppm decrease from the previous fuel rates and will be 7ppm. For the purpose of AFR, hybrid cars can be treated as either petrol or diesel.

What are the new advisory fuel rates used for?

The new AFRs are only applicable to those who use a car that is provided by their employers. The rates aren’t compulsory, as employers may pay employees less if it can be proved that the company car is more economical than the AFRs assume it is. This can occur, for instance, when fleet cars are more fuel efficient than the AFRs.

When used by business owners, the rate can only be applied in the two following instances:

• to reimburse employees who use their company car for business travel
• when employees need to repay fuel costs when it is has been used for private travel

When reimbursements for business travel in company cars take place, HMRC will accept that no taxable profit for Class 1A National Insurance needs to be paid.

How are advisory fuel rates calculated?

It’s important to note that the previous rates can still be used for up to one month from the date that the new rates are introduced.

With the average cost of a litre of fuel (whether petrol or diesel), the size of the engine and how many miles per gallon used on average (which is based on the manufacturer’s guidelines), HMRC estimate fuel prices and round them to the nearest penny for them to become the AFR.

HMRC will review the advisory fuel rates quarterly on:

1st March

1st June

1st September

1st December

As fuel prices can change quite frequently, these quarterly reviews allow HMRC to calculate revised AFRs, should they be required.

To find out more about changes to Benefits in Kind legislation, please click here

All information is correct at time of going to print/live and on the best knowledge and understanding of the author at the time. This article is for general information only and does not constitute financial advice or recommendations for individual circumstances. No responsibility is taken for any actions taken on the base of the information within this article.