HM Revenue and Customs (HMRC) has confirmed new advisory fuel rates that take effect from Tuesday, September 1. Diesel drivers with company cars, or those using personal cars for work, will pay rates based on engine size.
The quarterly update sees diesel rates hold or fall. Cars with engines of 1600cc or less will pay 15p per mile, unchanged from the previous period. Engines sized 1601cc to 2000cc drop 1p to 16p, and those over 2000cc drop 1p to 22p.
How the rates are set
HMRC reviews the charges every three months, adjusting them based on the current cost of petrol, diesel and EV charging. While some diesel rates decrease, the cost of the largest petrol engine is increasing.
Spanish manufacturer Seat explains how the system works: "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."
Tax implications for drivers
Seat adds: "Set quarterly by the Government, advisory fuel rates are designed to reflect the typical cost of fuel when driving a company car." The manufacturer notes that at advisory fuel rates, employees won't incur any tax liability. Below those rates, they may be eligible for a tax rebate. Above them, company car drivers may be liable for additional tax unless they can explain the higher cost.
Company car drivers can also reduce benefit-in-kind costs by paying back their private mileage.
When the rates apply
HMRC says these rates only apply to employees using a company car. Use them when reimbursing employees for business travel in 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.
