Advisory Fuel Rates (AFR) or Advisory Electric Rates (AER) are set by the Government and should only be used for employees who drive a company car. These rates can be used by businesses when you need to reimburse employees for business travel in their company cars or when your employees need to repay the cost of fuel used for private travel in their company car.
HMRC reviews AFR and AER quarterly on 1 March, 1 June, 1 September and 1 December, and this March there is a change to petrol and diesel AFR. Both are being reduced despite fuel prices increasing since the start of 2024 according to results gathered by Statista.
Reimbursing your employees for company car business travel
There’s no taxable profit or Class 1A National Insurance to pay if you stick to or below the AFR/AER for the engine size and fuel type of the company car.
However, if you reimburse more than the AFR/AER, but are unable to document a higher fuel cost per mile, you’ll need to treat any excess as taxable profit and earnings, for which Class 1 National Insurance will be payable.
If the cost of business travel is higher than the guideline rates or if your company cars offer better fuel efficiency, you can determine your own rates to accordingly.
Employees to repay the cost of fuel used for private travel
Use the correct AFR/AER or higher to calculate how much your employees must repay the business for fuel used for private travel. Fuel benefit charges apply when an employee’s private fuel is paid for by the business, so it is important to ensure private mileage is recorded and reimbursed accurately to prevent a charge from arising.
If you can show that the full cost of private fuel is covered by employees repaying at a lower mileage rate, then AFRs are not required.
How rates are calculated
HMRC reviews AFR and AER quarterly and considers MPG figures and fuel prices. The new rates as of 1 March 2024 are below.
Petrol & LPG
Engine Size (cc) Petrol AFR LPG AFR
Up to 1400 13 pence 11 pence
1401 to 2000 15 pence 13 pence
Over 2000 24 pence 31 pence
Diesel
Engine Size (cc) AFR
Up to 1600 12 pence
1601 to 2000 14 pence
Over 2000 19 pence
Electric Vehicles
From 1 March 2024, AER for fully electric cars is staying at 9 pence per mile. Hybrid cars are treated as either petrol or diesel cars for AFR. Refer to the above tables for these rates.
The advisory electric rate for fully electric cars is calculated using electrical price data from:
- Department for Business, Energy & Industrial Strategy (BEIS)
- Office for National Statistics (ONS)
- Car electrical consumption rates from the Department for Transport (DfT)
- Annual car sales volumes to businesses (Fleet Audits average for the last three years)
The BEIS annually published ‘pence per kWhr’ cost is uprated by the quarterly ONS Consumer Prices Index for electricity to account for quarterly price variations.
Data source: www.gov.uk/guidance/advisory-fuel-rates
