New Advisory Fuel Rates from December 2024
HMRC has provided new Advisory Fuel Rates (AFRs) for company cars, effective from 1 December 2024.
These new advisory fuel rates are reviewed quarterly—in March, June, September, and December—to reflect current fuel prices and vehicle efficiencies.
The latest adjustment sees a reduction of 1p per mile across various categories, aiming to align reimbursement rates more closely with actual fuel costs.
New Advisory Fuel Rates from 1 December 2024
Petrol Cars:
Up to 1,400cc: 12p per mile
1,401cc to 2,000cc: 14p per mile
Over 2,000cc: 23p per mile
Diesel Cars:
Up to 1,600cc: 11p per mile
1,601cc to 2,000cc: 13p per mile
Over 2,000cc: 17p per mile
LPG Cars:
Up to 1,400cc: 11p per mile
1,401cc to 2,000cc: 13p per mile
Over 2,000cc: 21p per mile
Fully Electric Cars:
All engine sizes: 7p per mile
These rates can be used when reimbursing employees for the fuel costs they have paid for business travel in company cars or when employees repay the cost of fuel used for private travel paid by their employer. Employers can use these rates to ensure that reimbursements are tax-free and that there’s no additional National Insurance to pay.
Using Advisory Fuel Rates to repay private fuel and avoid the Car Fuel Scale Charge
The car fuel scale charge is a taxable benefit arising when an employer provides fuel for an employee’s private use in a company car. To avoid this charge, employees must reimburse the employer for the full cost of the private fuel provided. AFRs serve as a guideline for calculating the amount to be repaid.
For instance, if an employee drives 100 miles privately in a petrol car with an engine size of 1,600cc, the AFR is 14p per mile. Therefore, the employee should repay the employer £14 (100 miles x 14p) to cover the private fuel cost. Accurate records of private mileage and timely repayments are essential to ensure compliance and to prevent the car fuel scale charge from being applied.
Tax-free compensation when employees use their own vehicles
Employees who use their personal vehicles for business travel are entitled to tax-free mileage allowances, known as Approved Mileage Allowance Payments (AMAPs). These rates differ from AFRs and are designed to cover both fuel and other vehicle-related costs.
The current AMAP rates are:
Cars and Vans:
First 10,000 business miles per tax year: 45p per mile
Each mile over 10,000 miles: 25p per mile
Motorcycles:
All business miles: 24p per mile
Bicycles:
All business miles: 20p per mile
Employers can reimburse employees at these rates without any tax implications. If the reimbursement exceeds these rates, the excess amount is taxable. Conversely, if the reimbursement is less than these rates, employees can claim Mileage Allowance Relief on the difference.
New Advisory Fuel Rates – Key considerations
- Record-Keeping: Maintaining detailed records of business and private mileage is crucial. This includes dates, distances travelled, destinations, and the purpose of each journey.
- Timely Reimbursement: Employees should repay the cost of private fuel promptly to avoid the car fuel scale charge.
- Rate Reviews: AFRs are reviewed quarterly. Employers should stay updated with the latest rates to ensure accurate reimbursements.
- Electric Vehicles (EVs): The advisory rate for fully electric cars is 7p per mile. Hybrid cars are treated as either petrol or diesel cars for AFR purposes, depending on their fuel type.
By adhering to these guidelines, both employers and employees can manage fuel reimbursements effectively, ensuring compliance with HMRC regulations and optimising tax efficiency.
