Motorists are facing a new financial headache after being warned they could be hit in the pocket by new HMRC rate changes over company cars. Recent alterations to the Advisory Fuel Rates established by HM Revenue and Customs (HMRC) could leave drivers worse off, one firm is warning.
Revised figures, which took effect on 1 December 2024, saw the rates for petrol and diesel continue to drop to as low as 11p per mile for certain models. These are the rates of reimbursement for company car fuel costs.
Niall Riddel, CEO of business EV charge card company Paua, expressed concern that these rates could result in drivers being undercompensated – particularly those with an electric vehicle as a company car. “Paua makes it simple for businesses to properly compensate employees and be compliant with HMRC,” he said.
“Businesses are pushing drivers to adopt electric vehicles but without the right compensation mechanisms in place they risk underpaying their drivers for the business miles they complete. This can leave them in a sticky situation.”
Updated quarterly, the rates are designed to assist businesses in reimbursing fuel costs for all types of company vehicles. The figures are determined by comparing the average economy figure for specific classifications of vehicle with typical fuel prices each quarter to calculate the cost of operating the car per mile.
For all petrol and diesel models, the new Advisory Fuel Rates have decreased by 1p per mile. Yet the cost of running an electric model has remained unchanged, leading some to argue that EV owners covering 10,000 miles annually would be charged £2,000 more, reports the Express.
The shift occurs as motorists are poised to enjoy the lowest December fuel prices since the 2022 Russian invasion of Ukraine. Despite a slight increase in fuel costs in November 2024, the RAC points out that drivers are currently paying an average of 136.63p per litre for petrol and 142.46p for diesel.
Meanwhile, the cost of charging electric vehicles continues to climb steadily, with Zapmap reporting that the average rate for using a rapid charger in November 2024 was 80p/kWh. Advisory fuel rates from December 1, 2024, are as follows:
Petrol engines
- Under 1.4 – Reduced to 12p
- 1.4 to 2.0 – Reduced to 14p
- Over 2.0 – Reduced to 23p
Diesel engines
- Under 1.6 – Reduced to 11p
- 1.6 to 2.0 – Reduced to 13p
- Over 2.0 – Reduced to 17p
What are advisory fuel rates?
The RAC says: “Advisory Fuel Rates (AFRs) are the rates set by government to assist businesses in reimbursing or being reimbursed for fuel costs of company cars. The mileage rates apply only where a company must repay an employee for business travel in a company car, or where an employee is required to repay the company for personal travel in a company car.”
When can you use advisory fuel rates?
According to gov.uk, you can use the rates when you either:
- reimburse employees for business travel in their company cars
- need employees to repay the cost of fuel used for private travel
You must not use these rates in any other circumstances, gov.uk warns.