Jobaaj Stories
The UK’s tax authority, HMRC, has updated its Advisory Fuel Rates (AFR), affecting company car owners. These new rates, effective from March 1, 2025, will impact petrol, diesel, and electric vehicle users, with some drivers facing increased costs while others benefit from lower rates.
Do your employees use a company car?
— Condy Mathias (@CondyMathiasCA) February 11, 2025
Be aware that new Advisory Fuel Rates will apply from 1 March.
Contact us for more information. #HMRC #AFR pic.twitter.com/ZSDYVfCH3E
Who Do These Rates Apply To?
The Advisory Fuel Rates are used by businesses to reimburse employees for mileage in company cars or when workers cover fuel costs for personal use. These rates are reviewed every three months and are applicable only to company vehicles.
Key Changes in Fuel Prices
🔺Diesel Cars
- Small diesel cars (up to 1,600 cc) will see a 1p increase, from 11p per mile (ppm) to 12ppm.
- Mid-sized diesel cars (1,601cc–2,000cc) will remain unchanged at 13 ppm.
- Large diesel cars (over 2,000 cc) will stay at 17ppm.
🔺Petrol Cars
- Petrol cars between 1,401cc and 2,000cc will see a rise from 14ppm to 15ppm.
- Other petrol rates remain unchanged.
✅Electric Vehicles (EVs)
- The advisory electricity rate for EVs remains at 7ppm.
- This rate is calculated using the Domestic electricity cost per kilowatt-hour from government sources.
🔺Hybrid Vehicles
- Hybrid cars are treated as either petrol or diesel, depending on their fuel type.
How This Affects Employees
- If a company reimburses employees at or below the advisory rates, no extra tax or National Insurance is due.
- If employees repay the fuel cost for private use at the correct rate, there’s no fuel benefit charge.
- Businesses can use their own mileage rates if they believe their costs exceed the HMRC rates.
Transition Period
For those who prefer to stick with the older rates, HMRC allows a one-month transition period, meaning previous rates can still be used until April 1, 2025.
This update aims to keep fuel reimbursement fair and aligned with current fuel prices, ensuring company car users are properly compensated for their travel expenses.
