HMRC has confirmed that three Advisory Fuel Rates for drivers will be reduced from Tuesday, September 1. The tax authority, which reviews its fuel advisory rates every quarter, published the updated figures on its website, with the changes taking effect immediately.
Which rates are being cut?
The three rates being lowered are:
- Diesel cars with an engine size between 1,601cc and 2,000cc: down from 17p per mile to 16p per mile.
- Diesel cars with an engine size between 1,601cc and 2,000cc (second listing, likely a typo in the original source): down from 23p per mile to 22p per mile.
- LPG vehicles with an engine greater than 2,000cc: down from 21p per mile to 20p per mile.
Each reduction represents a 1p per mile decrease. The changes apply to company car users and employers who use these government-set rates for mileage reimbursements.
Why HMRC reviews these rates quarterly
Advisory Fuel Rates are designed to help employers reimburse employees for business travel in company cars, or for employees to repay fuel used for private travel. The rates aim to reflect current fuel costs across petrol, diesel, LPG, and electric vehicles.
HMRC reviews these rates every quarter to ensure they remain aligned with changing fuel prices and vehicle efficiency standards. For employers, the rates provide a straightforward method of reimbursing mileage expenses without needing to calculate fuel costs manually for every journey.
What this means for businesses and employees
Using HMRC Advisory Fuel Rates simplifies the process of managing mileage reimbursements for employees who use company vehicles. By following these rates, companies can keep paperwork simple and stay in line with tax rules, reducing the risk of mistakes or problems during audits.
The RAC explained: "Advisory Fuel Rates (AFRs) are the rates set by government to assist businesses in reimbursing or being reimbursed for fuel costs of company cars. The mileage rates apply only where a company must repay an employee for business travel in a company car, or where an employee is required to repay the company for personal travel in a company car."
With the new rates effective from September 1, businesses and employees using company vehicles should update their mileage reimbursement calculations accordingly to remain compliant with HMRC guidance.
