Bold headline: New UK fuel charge kicks in at all forecourts, and here’s what drivers should know now.
Introduction: HMRC has issued updated Advisory Fuel Rates (AFRs) for this year, affecting petrol, diesel, electric, and LPG vehicle drivers. These changes influence how company car users are reimbursed for business mileage and how private travel costs are reclaimed.
What AFRs are and who they affect: Advisory Fuel Rates are recommended reimbursement amounts used by employers when employees claim business mileage in company cars. They help determine whether a driver’s reimbursement creates a taxable benefit. HMRC reviews AFRs each quarter and publishes any revisions in late February, May, August, and November.
Petrol rates: AFRs for petrol-powered cars stay the same in this update. For petrol engines:
- Up to 1,400cc: 12 pence per mile (ppm)
- 1,401–2,000cc: 14 ppm
- Over 2,000cc: 22 ppm
Diesel rates: Diesel AFRs also remain unchanged:
- Up to 1,600cc: 12 ppm
- 1,601–2,000cc: 13 ppm
- Over 2,000cc: 18 ppm
LPG rates: There are notable adjustments for LPG-powered vehicles:
- Up to 1,400cc: 10 ppm (down from 11 ppm)
- 1,401–2,000cc: 12 ppm (down from 13 ppm)
- Over 2,000cc: 19 ppm (down from 21 ppm)
Hybrid and other notes: Hybrid cars are treated as either petrol or diesel for AFR purposes, depending on which fuel type applies. For drivers reclaiming business travel, these AFRs provide the baseline reimbursement.
How to apply these rates: If your mileage reimbursement rate matches or is lower than the applicable AFR for your car’s engine size and fuel type, there’s no taxable profit and no Class 1A National Insurance charge. If your vehicle is more fuel-efficient than the guideline, or if business travel costs exceed the AFRs, you can use your own rates to better reflect your actual costs, per HMRC guidance.
Additional context: AFRs are quarterly benchmarks that HMRC revisits in February, May, August, and November. The exact figures can be updated if fuel prices shift significantly, so it’s wise to check the latest HMRC AFR publication when planning reimbursements.
Bottom-line takeaway: For company car drivers across the UK, expect mainly stable petrol and diesel AFRs, with a meaningful reduction for LPG rates in several categories. Stay aware of quarterly updates to ensure your reimbursements stay aligned with HMRC guidelines and keep tax outcomes straightforward.
Discussion prompt: Do you think these AFRs accurately reflect current fuel costs across different vehicle types, or should there be broader adjustments to better capture real-world pricing? Share your thoughts in the comments.
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