HMRC advisory fuel rates are the pence-per-mile figures HMRC publishes for company cars, and they settle two everyday payroll questions: how much an employer can reimburse an employee for business mileage without a tax charge, and how much an employee must repay for private mileage to avoid the fuel benefit charge. HMRC reviews the rates every quarter, so the exact figures change through the year. This explains how the rates work, who they apply to, and where to find the current numbers, whatever quarter you are reading this in.
What are HMRC advisory fuel rates?
Advisory fuel rates are a set of rates, expressed in pence per mile and split by fuel type and engine size, that apply only to cars provided by an employer. HMRC sets them to reflect the cost of fuel used for business travel. Because pump prices move, HMRC recalculates the rates and publishes them on GOV.UK. You can find the figures that apply now on the GOV.UK advisory fuel rates page, which lists the rate for each engine band and the date it takes effect.
The rates matter because using them keeps the reimbursement or repayment inside HMRC's safe harbour. Pay or recover at the published rate, and there is no Income Tax charge and no National Insurance to account for. Step outside the rates, and a tax consequence can follow.
How are the rates used?
There are two main uses, and they pull in opposite directions.
The first is reimbursing an employee for business journeys in a company car. Where the employer pays for business mileage at or below the advisory rate, there is no taxable profit for the employee and no Class 1A National Insurance for the employer. If the employer pays more than the advisory rate and cannot show the actual cost per mile was higher, the excess is treated as taxable pay, with Class 1 National Insurance due on it.
The second is the other way round. Where an employee has a company car and the employer pays for fuel, private mileage would normally trigger the car fuel benefit charge, which can be expensive. The employee can avoid that charge by repaying the cost of all private fuel. Using the advisory rate to work out the repayment, backed by an accurate record of private mileage, means there is no fuel benefit charge to report.
Example. An employee drives 400 business miles in a month in a petrol company car. The employer reimburses at the current advisory rate for that engine size. Because the reimbursement is at HMRC's published rate, none of it is taxable and there is no National Insurance to settle. If the employer instead paid a flat rate above the advisory figure, the difference would need to be run through payroll as pay unless the actual fuel cost per mile could be evidenced.
How often do the rates change?
HMRC reviews the advisory fuel rates quarterly, with new figures normally taking effect on 1 March, 1 June, 1 September and 1 December. For up to one month after a change, employers can carry on using the previous rates before switching to the new ones. This is why it is worth checking the GOV.UK page each quarter rather than relying on a rate you noted down earlier in the year. A figure that was correct last quarter may no longer be, and quoting an out-of-date rate is a common source of payroll error.
How are electric company cars treated?
Fully electric company cars are not covered by the petrol and diesel advisory fuel rates. HMRC publishes a separate Advisory Electricity Rate for them, drawing on electricity price and consumption data. That rate is reviewed on the same quarterly cycle and is shown alongside the fuel rates on the same GOV.UK page. Hybrid cars are different again: for advisory fuel rate purposes they are treated as either petrol or diesel cars, according to the fuel they use, rather than getting the electric rate.
Where can I find the current rates?
The single authoritative source is HMRC's own guidance on GOV.UK. It always shows the rates in force, the date they apply from, and the previous quarter's figures for reference. If you would like the rates built into a payroll or expenses process so they update cleanly each quarter, that sits within wider tax planning for the business, and it is the kind of routine we help employers set up.
Frequently Asked Questions
No. Advisory fuel rates apply only to company cars. Where an employee uses their own vehicle for business, the separate mileage allowance payment rules apply instead, and these work on a different basis. It is worth being clear which set of rules fits the arrangement before reimbursing anyone.
If you reimburse business mileage above the advisory rate and cannot show the actual cost per mile was higher, the excess is treated as taxable pay, with Class 1 National Insurance due. Keeping to the published rate, or holding evidence of higher real costs, avoids that.
Where the employer pays for fuel in a company car, the employee must repay the full cost of private fuel to avoid the charge. Using the advisory rate to calculate the repayment, supported by an accurate record of private mileage, means there is no fuel benefit charge to report.
Yes. HMRC publishes a separate Advisory Electricity Rate for fully electric company cars, reviewed on the same quarterly cycle and shown on the same GOV.UK page. Hybrids are treated as petrol or diesel cars, not as electric ones.
If you would like help applying the advisory fuel rates to your payroll or expenses process, or reviewing the tax position on company cars, call us on 020 8554 2135 or email info@visionconsulting.co.uk. You can also reach us through our contact page.
By the Vision Consulting team.
This is general information, not advice. Your position depends on your circumstances.