Starting March 1, HM Revenue and Customs (HMRC) will implement revised Advisory Fuel Rates (AFR), affecting company car drivers across the UK. These changes introduce higher per-mile costs for certain petrol and diesel vehicles, with electric car users continuing to benefit from stable, lower reimbursement rates. The quarterly AFR review by HMRC is aimed at reflecting fluctuations in fuel prices, impacting business travel expenses for employees using company cars.
Under the latest update, diesel and mid-sized petrol vehicles will see increases in mileage reimbursement rates, adding extra costs for businesses and drivers alike. For diesel cars, those with engines up to 1,600cc will see their AFR rise from 11 pence per mile (ppm) to 12ppm. Meanwhile, diesel cars with engines between 1,601-2,000cc will remain unchanged at 13ppm, and those over 2,000cc will still receive 17ppm.
According to Fleet World, these adjustments respond to the increasing diesel costs, which are currently estimated at 146.1 pence per litre. On the petrol side, only mid-sized vehicles with engine sizes between 1,401-2,000cc will see their reimbursement rate rise from 14ppm to 15ppm. Smaller petrol cars below 1,400cc will stay at 12ppm, and larger petrol vehicles over 2,000cc will continue at 23ppm, reflecting petrol costs of 138.7 pence per litre.
Electric vehicle (EV) drivers will maintain their financial advantage as the advisory electricity rate (AER) remains unchanged at 7ppm. This rate is calculated based on the efficiency of 3.57 miles per kilowatt-hour (kWh) and the domestic electricity price of 25.24 pence per kWh. The stable rate for EVs reinforces the financial incentives aimed at promoting zero-emission motoring.
Hybrid vehicles fall under the respective categories of petrol or diesel for AFR purposes depending on their engine configurations and specifications. The new AFR structure has sparked discussions among fleet managers and company drivers as rising fuel costs put additional strain on business expenditures.
Fleet World noted the rise for some AFRs follows recent data showing petrol and diesel pump prices have jumped again for the fourth consecutive month. This has raised concerns among drivers who may find it increasingly expensive to use their company vehicles for work-related travel.
The advisory fuel rates are explicitly designated for reimbursing employees who use company cars for business travel or for those required to repay fuel costs incurred during personal travel. They cannot be utilized for any other circumstances, ensuring clarity and consistency across reimbursement practices.
HMRC's adjustments come following comprehensive reviews undertaken at regular intervals to align the rates with the prevailing market conditions. Drivers are encouraged to be aware of these changes as they may affect their personal finances, especially as fuel prices continue to fluctuate.
For liquefied petroleum gas (LPG) vehicles, there were no changes, maintaining the rates at 11ppm for smaller cars and 21ppm for larger engines over 2,000cc.
The new advisory fuel rates serve as important guidelines for ensuring fair reimbursement for business travel, preventing excessive claims, and promoting sustainable transport options. They play a significant role within company car policies, encouraging businesses to adopt more environmentally friendly vehicles.
With the cost of living continuing to rise and economic pressures mounting, drivers and companies alike are tasked with navigiating these updated fuel costs and ensuring compliance with HMRC regulations.