What are the HMRC Fuel Rates for Company Cars?
Advisory Fuel Rates (AFRs) are the rates recommended by HMRC to assist businesses either in reimbursing employees for using company cars for business travel or in being reimbursed back by employees for fuel costs for private travel when using a company car.
The HMRC fuel rates that have applied since 1 March 2021 are:
|Engine Size||Petrol – amount per mile||LPG – amount per mile|
|1400cc or less||10 pence||7 pence|
|1401cc to 2000cc||12 pence||8 pence|
|Over 2000cc||18 pence||12 pence|
|Engine Size||Diesel – amount per mile|
|1600cc or less||9 pence|
|1601cc to 2000cc||11 pence|
|Over 2000cc||12 pence|
* Hybrid cars are treated as either petrol or diesel cars for this purpose.
(Please note that you can use the previous rates for up to 1 month from the date the new rates apply)
Reimbursing employees for fuel cost
When a company reimburses an employee for fuel costs for a business trip using the AFRs above, there will be no taxable benefit and no Class 1A National Insurance due.
Companies are permitted to pay a lower rate than the above if they can demonstrate that the company cars are proven to be more fuel efficient than the AFR suggests.
They also have the right to pay a higher amount than the AFRs, but in this case the company would need to demonstrate that the fuel cost per mile is actually higher; if not, any excess payment will be treated as taxable profit and subject to Class 1A National Insurance contributions.
Employees reimbursing the company for fuel cost
When an employee is required to repay the company for fuel cost for private trips using a company car, HMRC will accept that there is no fuel benefit charge when the price paid is equal or higher than the AFR above.
If the employee pays a lower amount, then it will be necessary to show that the amount paid covers the amount of personal fuel expense in full to avoid any charge.
If you require tax advice on HMRC advisory fuel rates, please don’t hesitate to contact a member of our team who will be happy to help you.