HMRC updates advisory fuel rates for company car mileage reimbursement. Petrol and diesel rates change, while electric rate remains the same. Effective March 1st.
HMRC has released updated Advisory Fuel Rates (AFRs) for company car mileage reimbursement. These rates, effective from March 1st, provide guidance on reimbursing employees for business travel in their company cars. The AFRs are designed to reflect the actual cost of fuel and help simplify expense reporting.
Key Changes in the New AFRs
The latest AFR update includes some adjustments to the previous rates:
- Petrol Engines: A 1p per mile increase has been introduced for mid-sized petrol engines (1,401cc to 2,000cc).
- Diesel Engines: The smallest diesel engines (1,600cc or less) also see a 1p per mile increase.
- Other Rates: All other rates, including the Advisory Electricity Rate (AER) for electric vehicles (EVs), remain unchanged.
New Advisory Fuel Rates (per mile)
Petrol
- 1,400cc or less: 12p
- 1,401cc to 2,000cc: 15p (up by 1p)
- Over 2,000cc: 23p
Diesel
- 1,600cc or less: 12p (up by 1p)
- 1,601cc to 2,000cc: 13p
- Over 2,000cc: 17p
LPG
- 1,400cc or less: 11p
- 1,401cc to 2,000cc: 13p
- Over 2,000cc: 21p
Electric
- 7p
Important Considerations
- Hybrid Vehicles: For AFR purposes, hybrid cars are treated as either petrol or diesel vehicles.
- Implementation Date: The new rates are effective from March 1st. However, the previous rates can still be used for up to one month from this date.
These advisory fuel rates are not mandatory, but are designed to give a reasonable guideline to employers. If employers pay more than the advisory fuel rate, there will be no tax or National Insurance implications. However, if the employer pays less than the advisory fuel rate, the employee can claim tax relief on the difference.
Sources: https://www.gbnews.com/lifestyle/cars/hmrc-petrol-diesel-electric-car-costs-advisory-fuel-rates
https://www.accountancydaily.co/hmrc-advisory-fuel-rates-company-car-users-1-march-2025
https://www.businesscar.co.uk/news/latest-afrs-include-some-increases/