HM Revenue and Customs (HMRC) has confirmed new advisory fuel rates that took effect from September 1, with petrol drivers of company cars facing increased charges depending on their vehicle's engine size. The new rates, which run from September to December, are now in place.
New rates for petrol cars
From September 1, petrol cars with engines under 1400cc will remain at 14p per mile, while those with engines between 1401cc and 2000cc will stay at 17p per mile. However, petrol cars with engines of 2000cc and above will see their rate increase from 26p to 27p per mile.
HMRC updates its advisory fuel rates quarterly, adjusting them based on the current cost of petrol, diesel and EV charging. The rates have increased significantly since 2022, when a 2000cc car would cost 15p per mile.
How advisory fuel rates work
Advisory fuel rates are used either for employers to reimburse employees for business travel in their company cars, or for employees to repay the cost of fuel used for private travel. HMRC reviews the charges every three months.
Spanish manufacturer Seat explains how they work: "If you're reimbursing employees for business travel in their company cars at a set pence per mile rate, then you need to be aware of the latest advisory fuel rates." Set quarterly by the Government, advisory fuel rates are designed to reflect the typical cost of fuel when driving a company car.
Tax implications for drivers
How much tax company car drivers will pay on fuel costs depends on the mileage rate your business uses when processing expense claims. At advisory fuel rates, employees won't incur any tax liability. Below advisory fuel rates, they may be eligible for a tax rebate. Above advisory fuel rates, company car drivers may be liable for additional tax, unless they can explain why the cost is higher.
Company car drivers can also reduce benefit-in-kind costs by paying back their private mileage. HMRC says about the rates: "These rates only apply to employees using a company car." The rates should be used when you either reimburse employees for business travel in their company cars or need employees to repay the cost of fuel used for private travel. HMRC adds: "You must not use these rates in any other circumstances."
