A new fuel charge update has taken effect at petrol stations across the UK, impacting drivers of petrol, diesel, electric, and LPG vehicles. HM Revenue & Customs (HMRC) has introduced its first Advisory Fuel Rate (AFR) adjustments of the year, which apply primarily to company car users and those reclaiming fuel costs for business travel.
AFRs are the recommended mileage reimbursement rates for employees using company vehicles. These rates help determine fair compensation for fuel expenses incurred during work-related journeys and outline repayments for private use of company cars.
The petrol AFRs remain steady at 12 pence per mile (ppm) for engines up to 1,400cc, 14ppm for engines between 1,401cc and 2,000cc, and 22ppm for those above 2,000cc. Diesel rates are unchanged as well, staying at 12ppm for engines up to 1,600cc, 13ppm for 1,601cc to 2,000cc, and 18ppm for engines exceeding 2,000cc.
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However, LPG vehicles see a slight decrease in reimbursement rates: vehicles up to 1,400cc drop from 11ppm to 10ppm; those in the 1,401cc to 2,000cc range fall from 13ppm to 12ppm; and engines larger than 2,000cc decrease from 21ppm to 19ppm. Hybrid vehicles are categorized in accordance with whether they have petrol or diesel engines for AFR calculations.
HMRC reviews these advisory fuel rates quarterly—typically publishing updates in February, May, August, and November—based on prevailing fuel prices. Employers who reimburse employees at or below these AFRs avoid creating a taxable benefit, so neither the employee nor the employer owes Class 1A National Insurance Contributions on the fuel reimbursements.
HMRC also notes that if a company’s real fuel costs or a vehicle’s efficiency differ from AFR guidelines, employers may set reimbursement rates that better reflect their individual circumstances.