How the latest HMRC advisory fuel rates impact your business travel costs

The HM Revenue & Customs (HMRC) advisory fuel rates, updated quarterly, play an important role in how businesses manage employee reimbursements for company car travel.

With the new rates effective from 1 December 2024, business owners should take note of the changes, which include reductions in petrol and diesel rates and an unchanged rate for electric vehicles.

The new rates from 1 December 2024

Electric cars

The advisory electricity rate for fully electric vehicles remains at 7p per mile, unchanged from previous rates. Key details include:

• Miles per kilowatt-hour: 3.57
• Domestic electricity cost per kilowatt-hour: 26.14p
• Rate per mile: 7.31p (advisory rate remains 7p)

Petrol and LPG

For petrol and LPG vehicles, petrol rates have decreased by 1p per mile across all engine sizes, while LPG rates remain unchanged:

• Petrol cars with engines up to 1400cc: 12p per mile (previously 13p)
• LPG cars with engines up to 1400cc: 11p per mile (unchanged)
• Petrol cars with engines between 1401cc and 2000cc: 14p per mile (previously 15p)
• LPG cars with engines between 1401cc and 2000cc: 13p per mile (unchanged)
• Petrol cars with engines over 2000cc: 23p per mile (previously 24p)
• LPG cars with engines over 2000cc: 21p per mile (unchanged)

Diesel

Diesel vehicles have seen a 1p per mile reduction across all engine sizes:

• Diesel cars with engines up to 1600cc: 11p per mile (previously 12p)
• Diesel cars with engines between 1601cc and 2000cc: 13p per mile (previously 14p)
• Diesel cars with engines over 2000cc: 17p per mile (previously 18p)

Hybrid vehicles are treated as petrol and diesel for these rates.

When do the rates apply?

Advisory fuel rates are applicable in specific scenarios:

• Reimbursing employees for business travel in their company cars.
• Repaying the cost of fuel for private travel in company vehicles.

In these cases, HMRC will accept that no taxable profit arises, and there is no Class 1A National Insurance liability.

However, these rates cannot be used for other purposes, such as calculating fuel costs for privately owned vehicles.

What does this mean for your business?

Cost-saving opportunities

For businesses reimbursing employees for business travel, the 1p per mile reduction in petrol and diesel rates may result in lower overall costs.

While the savings may appear small on a per-mile basis, they can add up significantly across a fleet or for employees who cover long distances.

Consideration for electric vehicles

With the electric mileage rate unchanged at 7p per mile, and petrol and diesel rates now lower, businesses may question whether switching to electric company cars is still as cost-effective.

However, when paired with lower maintenance costs and environmental considerations, electric vehicles remain an attractive long-term option for many businesses.

Improved accuracy in compliance

Using HMRC’s advisory fuel rates helps businesses avoid creating taxable benefits for employees or triggering National Insurance obligations.

This simplifies administration and reduces the risk of reporting errors.

To make the most of these changes, ensure your policies are up to date, your employees are informed, and your business is equipped to handle the quarterly updates.

If you require support with HMRC advisory fuel updates, please get in touch with your Seymour Taylor representative or contact us on enquiries@stca.co.uk 01494 552100.

This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at time of publishing on [date, month, year].