HM Revenue and Customs has confirmed that drivers of petrol cars with engines over 2,000cc will now be charged 26 pence per mile under updated advisory fuel rates. The change, effective from June, applies to company car users who are reimbursed for business travel or who repay the cost of petrol for personal use.
Revised rates for smaller engines
HMRC also set lower rates for smaller petrol engines: 14p per mile for cars up to 1400cc, and 17p per mile for those between 1401cc and 2000cc. These rates are reviewed quarterly and adjusted based on current fuel costs.
Significant increase since 2022
The 26p rate marks a substantial rise from 2022, when a 2000cc car cost only 15p per mile. Spanish manufacturer Seat explained: “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
Seat added: “How much tax company car drivers will pay on fuel costs depends on the mileage rate your business uses. At advisory fuel rates, your 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 guidance
HMRC states these rates only apply to employees using a company car. Employers should use them when reimbursing business travel or when employees repay fuel costs for private travel. The rates must not be used in any other circumstances.
