From Tuesday, September 1, company car drivers using petrol vehicles will face revised advisory fuel rates set by HM Revenue and Customs (HMRC), with the rate for the largest engines increasing to 27 pence per mile.
HMRC updates its advisory fuel rates quarterly, and the new rates take effect immediately. These rates are used either by employers to reimburse employees for business travel in company cars, or by employees to repay the cost of fuel used for private travel.
New rates by engine size
The current rate for petrol cars with engines over 2000cc stands at 26 pence per mile. From September 1, this will rise to 27 pence per mile. The rates for smaller engines remain unchanged: 14p per mile for cars with engines of 1400cc or below, and 17p per mile for cars with engines between 1401cc and 2000cc.
HMRC reviews these charges every three months, 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 the rates work
Spanish manufacturer Seat explains how the system functions: "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."
How much tax company car drivers pay on fuel costs depends on the mileage rate the business uses when processing expense claims. At advisory fuel rates, employees incur no 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 that these rates only apply to employees using a company car. The rates should be used when reimbursing employees for business travel in their company cars, or when employees need to repay the cost of fuel used for private travel. The rates must not be used in any other circumstances.
