News added on 02.03.2016


Company cars

New advisory fuel rates

HMRC has updated its advisory fuel rates with effect from 1 March 2016. What do you need to know about them?

Reimbursement. The advisory fuel rate (AFR) is mainly of use in two situations. Firstly, where an employee personally pays for fuel used in their company car and claims reimbursement from their employer for business mileage. Secondly, where the business pays for all fuel, e.g. via a company fuel card or account at a petrol station, and requires the employee to reimburse it for the cost of their non-business mileage.

No tax or NI for employee. Using the AFR means a company doesn't need to work out the actual cost of fuel per mile for each of its company vehicles. It can reimburse their employees safe in the knowledge that HMRC will accept that the payment doesn't trigger a benefit in kind charge.

New rates. With fuel prices having fallen in the last few months, HMRC has reduced the pence per mile rates for all petrol and diesel cars. The rates from 1 March 2016 are:

Engine size Petrol Diesel LPG
1,400cc or less 10p   7p
1,600cc or less   8p  
1,401cc to 2,000cc 12p   8p
1,601cc to 2,000cc   10p  
Over 2,000cc 19p 11p 13p

Tip. For up to one month from the date of the change, it’s up to the employer whether to use the previous or new rate.

The new advisory fuel rates affect all petrol and diesel company cars. Employees can reimburse their employers at these rates to avoid a benefit in kind charge on fuel they've used for private journeys in a company car.

© Indicator - FL Memo Ltd • Telephone: (01233) 653500 • Fax: (01233) 647100 • •
Calgarth House, 39-41 Bank Street, Ashford, Kent TN23 1DQ • VAT GB 726 598 394 • Registered in England • Company Registration No. 3599719