Advisory Fuel Rates are set by HMRC and are the recommended amounts that drivers can claim back for business mileage in a company car. They can change during the year because they are reviewed every quarter in February, May, August and November. This allows for fluctuating fuel prices to be taken into account within the calculation of the figures.
What are Advisory Fuel Rates?
The new Advisory Fuel Rates came into effect from September 1st 2015 showing a decrease in the diesel allowance for vehicles with an engine size from 1601cc and for petrol or LPG cars that have less than a 1400cc engine. But the decrease is only by 1p per mile and the rest of the amounts remain the same.
| Engine Size | Petrol – per mile | LPG – per mile |
| Up to 1400cc | 11p | 7p |
| 1401-2000cc | 14p | 9p |
| 2001cc and above | 21p | 14p |
| Engine Size | Diesel – per mile |
| Up to 1600cc | 9p |
| 1601-2000cc | 11p |
| 2000cc | 13p |
Application of Advisory Fuel Rates
There are only two situations in which these rates are applicable and they both concern the responsibility for fuelling a company car.
- Paying back fuel costs of journeys that are not work related.
As an employer you can use these rates to calculate how much an employee owes you for private journeys in the company car. HMRC will agree that there is no fuel benefit charge if you have a record of all the private travel mileage and used the correct rate to work out the cost to the employee. The rate may be higher or lower than the AFR if you can show that the lower rate covers the entire cost of the fuel used for out of work travel.
- Fuel cost paid back to employees
If you reimburse your employees for the amount they have spent on filling up the company car for work journeys then you can use these AFR. If you follow their recommendations then HMRC will acknowledge that there is no taxable profit and no Class 1 National Insurance to pay. If you decide to pay more than HMRC’s suggested amount then you must be able to show that the price of the fuel is higher. Otherwise there is no fuel benefit charge and any excess will be seen as taxable profit. When considering Class 1 National Insurance it would, therefore, be deemed income.
So, whether you are an employer or an employee, the AFR provide guidance on the amount of mileage payable in both directions! It is not an entirely binding rule, but there are knock on effects of using your own rates if you are an employer. To allow for systems to catch up, you are allowed to use the old rates for 1 month after the new figures are announced.
P11d form
If you have a company car your employer has to give you a P11d form at the end of each tax year. This shows the taxable benefit you have received during the previous tax year. It’s always best to check that your P11d accurately reflects the company car benefit you have been given to make sure it is correct.
Use of own car for work purposes
If you have used your own vehicle for work purposes a different set of rules apply. You can claim back a mileage allowance of .45p per mile for the first 10,000 miles and .25p per mile thereafter.
Some employers pay a mileage allowance and some don’t, this means that – depending on your own set of circumstances – you could be entitled to claim a mileage tax rebate.
Tony Shanks