Millions of company car drivers in the UK may see changes to the rates used for business mileage, as HMRC is expected to publish updated Advisory Fuel Rates from September. These quarterly rates are used by employers to reimburse staff for business journeys and to determine repayments for private fuel use.
Expert advice on using the correct rates
Joe Lytwyn, a personal finance expert at thimbl.com, stressed the importance of using the latest figures when submitting mileage claims. He said: "HMRC's Advisory Fuel Rates are designed to reflect the average fuel cost of running a company car for business journeys. They're primarily used by employers when reimbursing staff for business mileage or when employees repay fuel used for private journeys in a company car. They're reviewed every three months because fuel prices don't stand still, so it's important that businesses keep up with the latest figures."
However, Lytwyn pointed out a common misconception: these rates apply only to company cars, not to employees using their own vehicles, which are covered by different HMRC rules. He also warned that employers cannot arbitrarily choose any mileage rate without tax implications.
Tax consequences of incorrect rates
Using the wrong rates could lead to unexpected tax consequences. Lytwyn explained: "Potentially, yes. If an employer reimburses above HMRC's Advisory Fuel Rate without being able to justify the higher cost, the excess could become taxable. Equally, if employees are reimbursed below the advisory rate, they may be able to claim tax relief on the difference in some circumstances."
Poor record-keeping is another common issue. Lytwyn advised: "People often forget to log journeys properly, or they mix business and personal mileage together. Others assume every trip qualifies as business travel when that isn't always the case. Having accurate mileage records makes life much easier if there are ever any questions about a claim."
Steps to take before the September update
Ahead of the update, Lytwyn recommended drivers review their mileage records and their employer's reimbursement policy. He said: "The simplest step is to check you're using the correct mileage records and that your employer is working from the latest HMRC rates. Keep a record of where you've travelled, why the journey was for business and the mileage covered."
He also cautioned against assuming current rates will remain: "Don't assume the current rates will remain the same. Once HMRC publishes the updated figures, check whether your employer has updated its mileage policy and make sure any new claims use the correct rates."
