HMRC has announced an update to its Advisory Fuel Rates (AFR), which is now in effect as of 1 December 2023. The rates are published every quarter and will next be published on 1 March 2024.

AFR is paid when:

• Employees use their company cars and are reimbursed for business travel; or
• Employees need to repay the cost of fuel used for private travel in their company car.

The costs should be distinguished from the Approved Mileage Allowance Payment (AMAP) rates, which are used by employees using their own vehicles.

There is a significant monetary difference between the AFR and AMAP rates, therefore, employers must be aware of applying the appropriate rates depending on whether an employee is using a company car or their own vehicle. This is a common check undertaken by officers during an HMRC Employer Compliance Review. It is therefore imperative that the correct rates are applied, and accurate records are maintained to support business and private travel mileage. Provided the correct rates are used, no taxable benefit will arise.

What are the new rates?

The petrol, diesel, LPG and electric fuel rates from 1 December 2023 are as follows:

Petrol

Up to 1400cc – 14 pence per mile (+1p)
1401cc to 2000cc – 16 pence per mile (no change)
Over 2000cc – 26 pence per mile (+1p)

Diesel

Up to 1600cc – 13 pence per mile (+1p)
1601cc to 2000cc – 15 pence per mile (+1p)
Over 2000cc – 20 pence per mile (+1p)

LPG

Up to 1400cc – 10 pence per mile (no change)
1401cc to 2000cc – 12 pence per mile (no change)
Over 2000cc – 18 pence per mile (-1p)

Fully electric cars*

Advisory electric rate – 9 pence per mile (-1p)

*Electricity is not considered as car fuel for benefit purposes.

Hybrid cars

Plug-in hybrid and hybrid cars are treated as petrol or diesel vehicles for the purposes of the AFR.

The previous rates from 1 September 2023 can be used for up to one month from the date that the new rates apply – so until 1 January 2024.

What are the next steps for employers?

Due to the cost of living crisis and increase in fuel costs, it may be time to look at your car fleet and consider the fuel and tax advantages of electric cars, especially through a salary exchange arrangement.

If you have any questions about HMRC Employer Compliance Reviews, reviewing fleet car costs or salary exchange, please contact the Employment Tax team at EmploymentTax@haysmacintyre.com.