Drivers have been warned it could be more expensive to travel in the UK after new petrol, diesel and electric car rates get rolled out.
HMRC has announced new Advisory Fuel Rates which will come into effect from March 1, introducing changes to company car rates.
The updated rates include a penny increase for diesel cars with engines up to 1,600cc, rising from 11 to 12 pence per mile (ppm).
For petrol vehicles, the only change affects cars with engine sizes between 1,401-2,000cc, which will see rates increase from 14ppm to 15ppm.
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The new Advisory Fuel Rates help calculate how much reimbursement to give for using company cars
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The changes come as part of HMRC’s quarterly review of fuel rates for company car users.For diesel vehicles, the new rates show varying changes across different engine sizes.
While cars with engines up to 1,600cc will see an increase to 12ppm, rates for larger engines remain unchanged. Diesel vehicles with engines between 1,601-2,000cc will continue at 13ppm.
The rate for diesel cars with engines over 2,000cc stays at 17ppm. HMRC’s calculations show these rates are based on current diesel prices of 146.1 pence per litre.
For petrol vehicles, the AFR changes affect only one category while others remain stable. Cars with engine sizes between 1,401-2,000cc will see their rate increase to 15ppm.
The AFR for petrol vehicles up to 1,400cc stays unchanged at 12ppm. Larger petrol cars with engines over 2,000cc continue at the existing rate of 23ppm.
These rates are calculated using current petrol prices of 138.7 pence per litre, with HMRC considering different fuel efficiency levels across engine sizes.
However, the advisory electricity rate for electric company car drivers remains unchanged at 7ppm. HMRC has detailed that this rate is calculated based on an electrical efficiency of 3.57 miles per kilowatt hour.
The calculation also factors in domestic electricity costs of 25.24 pence per kilowatt hour. This rate allows electric vehicle drivers to claim back fuel costs from their employers at a standardised rate.
For liquefied petroleum gas (LPG) vehicles, the rates remain consistent across all engine categories.For vehicles up to 1,400cc, the rate stays at 11ppm.Cars with engines between 1,401-2,000cc continue at 13ppm.
Larger LPG vehicles over 2,000cc maintain their rate at 21ppm. These LPG rates are calculated based on fuel prices of 98.3 pence per litre.
HMRC also confirmed hybrid cars will continue to be classified as either petrol or diesel vehicles for AFR purposes, depending on their specific design.
Advisory Fuel Rates introduced by HMRC are used to calculate reimbursement for employees using company cars for business travel.
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Advisory Fuel Rates are calculated quarterly
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These rates also apply when employees need to repay their employer for private travel costs.HMRC stipulates that if the mileage rate paid does not exceed the AFR for the specific engine size and fuel type, no taxable profit will be incurred.
Additionally, there will be no Class 1A National Insurance liability in such cases. The rates are calculated quarterly by HMRC using data from various sources, including the Department for Energy Security and Net Zero and the Office for National Statistics.
