Updated HMRC Fuel Rates for Company Cars: Key Points

Travel is a big part of a property agent’s job, so the recent reduction in HMRC’s recommended fuel rates for company petrol and diesel cars, starting 1 March, is good news. This change will bring down the costs for many in the property industry.

The new rates, effective from tomorrow, have been lowered by 1 to 2 pence per mile for petrol and diesel engines. Additionally, rates for LPG engines have gone up by 1 penny per mile for smaller vehicles and by three pence per mile for those over 2000cc.

The previous rates from December can still be used for one month after the new rates take effect.

These rates are specifically for:

• compensating employees for business travel in their company cars; or
• having employees pay back the cost of fuel for personal use.
• The rates should not be used for anything else. If they’re used as intended, you don’t need to seek special permission for the payments you make to employees.

Starting 1 March 2024, the rate for electric cars remains the same at 9p per mile, and like the fuel rates, it is reviewed every three months.

When reimbursing employees for business travel in their company cars, HMRC recognizes this as non-taxable with no need for Class 1A national Insurance contributions.

Guidance from HMRC:

Appropriate Circumstances for Mileage Rate Use

Only employees with company cars can use these rates. They’re applicable for:

• employee reimbursement for business travel in their company cars
• having employees repay fuel costs for private travel

These rates can’t be used for any other reasons.

Reimbursing Employees for Business Travel

If the mileage rate paid doesn’t exceed HMRC’s fuel rates for the car’s engine size and fuel type, it’s not counted as a taxable profit, and there’s no National Insurance contribution required.

You can use your own rates if your cars consume less fuel or the cost of business travel is higher than the advisory rates.

Paying higher than advisory rates without justifying the actual fuel costs will require treating the excess as taxable profit and for National Insurance, unless it’s strictly for business travel.

Employees Repaying for Private Travel Fuel Costs

There won’t be a fuel benefit charge if private travel is accurately accounted for and repaid by employees using the correct (or higher) rate.

If the full cost of private fuel is covered by employees paying a lower rate, the advisory rates don’t need to be used.

Rate Calculation Method

HMRC reviews the rates quarterly on:

• 1 March
• 1 June
• 1 September
• 1 December

Average miles per gallon (MPG) from manufacturers’ data and business sales figures are used, reduced by 20% for LPG due to energy density. The rates per mile are rounded to the nearest whole penny, down for figures ending in a number less than 0.5 and up for figures greater than 0.5.

Current fuel prices from the Department for Energy Security and Net Zero, and for LPG from the AA are considered in the calculations.

The electric rate for fully electric cars is derived using electrical price data from government and industry sources and sales volume. Rates are adjusted with the Consumer Prices Index to account for quarterly changes.

The advisory fuel rates are directly based on the calculations from these tables.

Petrol

Diesel

LPG

Electric

From 1 March 2024, the advisory electric rate for fully electric cars will be 9 pence per mile.

Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates.

The advisory fuel rates for petrol, LPG and diesel cars are shown in these tables.

You can use the previous rates for up to 1 month from the date any new rates apply.

From 1 March 2024

From 1 December 2023 to 29 February 2024

From 1 September 2023 to 30 November 2023

From 1 June 2023 to 31 August 2023

From 1 March 2023 to 31 May 2023

From 1 December 2022 to 28 February 2023

From 1 September 2022 to 30 November 2022

From 1 June 2022 to 31 August 2022

From 1 March 2022 to 31 May 2022