If your business reimburses employees for business travel in their company cars or if employees are required to repay fuel costs for private travel, it is important to keep up to date with the advisory fuel rates set out by HM Revenue and Customs (HMRC).
The advisory fuel rates for company cars are reviewed quarterly, and as of 1 September 2024, the rates for petrol, diesel, and electric vehicles have been cut.
This reduction can directly impact your business, offering potential savings on fuel reimbursements.
What are advisory fuel rates?
Advisory fuel rates are set by HMRC to provide a guideline on how much businesses can reimburse employees for fuel used during business travel in company cars, or how much employees should repay for private mileage.
Using these rates helps businesses avoid complex tax implications, as HMRC confirms that if the correct rates are used, no taxable profit arises, and no Class 1A National Insurance needs to be paid.
New fuel rates from 1 September 2024
From 1 September 2024, HMRC has reduced the advisory fuel rates for petrol and diesel vehicles, as well as for electric vehicles.
Petrol rates:
- 1400cc or less – 13p per mile (previously 14p)
- 1401cc to 2000cc – 15p per mile (previously 16p)
- Over 2000cc – 24p per mile (previously 26p)
Diesel rates:
- Up to 1600cc – 12p per mile (previously 13p)
- 1601cc to 2000cc – 14p per mile (previously 15p)
- Over 2000cc – 18p per mile (previously 20p)
Electric vehicle rate:
- All electric cars – 7p per mile (previously 8p)
Hybrid vehicles are treated as either petrol or diesel cars, depending on their fuel type.
How the recent rate cuts benefit your business
The cut in fuel rates may seem minor, but for businesses with a fleet of company cars, these reductions can add up over time.
For businesses reimbursing employees for business travel, the 1p to 2p reductions per mile will result in lower overall payments, which could provide significant savings for the business, especially if your employees cover long distances.
By following the advisory rates, you can avoid additional administrative work related to National Insurance contributions or taxable profits.
The quarterly review of rates also means that they stay in line with actual fuel costs, helping businesses maintain accuracy when calculating reimbursements.
With the growing popularity of electric vehicles, the reduction in the electric mileage rate to 7p per mile is particularly noteworthy.
If your company is looking to encourage the use of electric cars, this reduction makes reimbursing for electric travel even more cost-effective for your company.
Transitional period for the previous rates
For those concerned about immediate changes, HMRC allows businesses to continue using the previous rates (effective from June 2024) until the end of September 2024.
This gives businesses some flexibility in managing the transition to the new rates, especially if they have already processed reimbursements or fuel repayments based on the older rates.
For further assistance in understanding how these changes apply to your business, contact our team today.
