HM Revenue and Customs (HMRC) will update its mileage reimbursement rates for company car drivers from 1 September. These advisory fuel rates, reviewed every three months by the tax authority, assist employers in reimbursing staff for business mileage and help determine the amount employees should repay for fuel used during private journeys.
Joe Lytwyn, a personal finance expert at thimbl.com, explained that HMRC’s Advisory Fuel Rates are intended to reflect the average cost of fuel for running a company car on business trips. He emphasised that these rates are primarily used by employers when reimbursing business mileage or when employees repay fuel costs for private use of a company car.
Lytwyn highlighted several common misconceptions regarding these rates. He clarified that they only apply to company cars, not to employees who use their own vehicles for work purposes, as different HMRC rules govern those cases. Additionally, employers cannot arbitrarily set mileage rates without considering tax implications.
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“If an employer reimburses above HMRC’s Advisory Fuel Rate without justification, the excess amount may become taxable,” said Lytwyn. Conversely, if employees receive reimbursement below the advisory rate, they might be eligible to claim tax relief on the difference in certain circumstances. He advises employees to understand how their mileage payments are calculated to ensure compliance.
The quarterly review ensures the rates remain aligned with fluctuating fuel prices. While changes are not always substantial, using outdated rates could result in incorrect reimbursements or errors in tax treatment. Staying informed of the latest advisory rates helps both employers and employees manage mileage claims accurately and in accordance with HMRC guidance.