New Advisory Fuel Rates (AFRs) have come into effect from the beginning of September 2021, which apply to employees who use a company car.
AFRs are set by the Government as a guide to business in repaying car fuel costs when the employee is carrying out company business.
HM Revenue & Customs (HMRC) says that as long as the rate they pay is no higher than the AFR, businesses are exempt from Class 1A National Insurance and it is accepted that no taxable profit is gained.
The figures are reviewed quarterly and the previous rates, which were effective from 1 June 2021, can be used for up to one month from the date the new rates apply, until 1 October 2021 in this case.
Pence per mile (PPM) rates for petrol and diesel have increased for all three engine-size ranges to reflect rising fuel prices, while all three LPG rates are reduced.
Electric cars are becoming more and more prominent on the roads, but electricity is not considered a fuel for car fuel benefit purposes. Therefore, the Advisory Electricity Rate for fully electric cars attracts a rate of 4p per mile. Hybrid cars are treated as either petrol or diesel cars for the purposes of AFRs.
The new rates are:
| Engine size | Petrol – amount per mile | Diesel – amount per mile | LPG – amount per mile |
| 1400cc or less | 12 pence | 10 pence | 7 pence |
| 1401cc to 2000cc | 14 pence | 12 pence | 8 pence |
| Over 2000cc | 20 pence | 15 pence | 12 pence |
There have been steep rises in the costs of petrol and particularly diesel over the last few months and the rise is designed to reflect that.
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.
For help and advice with tax related matters, please get in touch with our expert team today.
