As of 1st December 2024, HMRC has implemented revised Advisory Fuel Rates (AFRs) for company cars, depending on their engine size and fuel type. Here at Ellacott Morris we have summarised these changes below to help companies and company car drivers understand how they may be affected.
Please note that AFRs only apply to company cars and not personal vehicles even when used for business purposes. They are only applicable when employers reimburse employees for business-related journeys when using a company vehicle, and when employees reimburse employers for using a company vehicle for private mileage.
It is important to understand that these rates are ‘advisory’ although employers must reimburse employees for the cost of fuel when using a company car for business activities. Reimbursement up to or at the advisory rate per mile is non-taxable and exempt from National Insurance Contributions (NICs) for employees.
When employees use a company car for private journeys, and the employer covers the fuel expenses, they must either reimburse the company for the fuel at the AFR or declare the use of the company car as a taxable benefit. Employees must keep a record of any private milage to avoid those journeys being classified as a taxable benefit. If the company car is more efficient than the AFR, then the rates don’t have to be used providing the employer can prove that the employee has covered the total fuel cost for private miles at the lower rate.
If employers choose to reimburse at a rate higher than the advisory rate, they must validate their higher reimbursement with the specific fuel costs per mile of the company cars they provide. Otherwise, any excess over the HMRC’s AFRs will be taxed as a part of employees' income, including NICs.
The new rates come into force on 1st December 2024, but the previous rates can be used for up to one month from this date.
Please find details of the revised AFRs as of 1st December 2024 below:
In summary, compared to the last revision from 1 September 2024, AFRs for petrol cars have decreased by 1p / mile for all engine sizes. The rates for diesel cars have also decreased by 1p /mile for all engines. LPG fuel rates have remained the same as have electric rates at 7p / mile.
Should you require any assistance with AFRs for your business, please contact a member of our team. They’re revved up and ready to help!
