New HMRC fuel rates launching today will impact millions of petrol, diesel and electric car drivers
Petrol and diesel drivers have been warned of new advisory fuel rates launching today, which will see them pay more to travel on UK roads.
The updated rates, which are used to calculate company car tax allowances, include increases for both diesel and petrol vehicle owners of specific engine categories.
The changes announced by HMRC will see diesel cars with engines up to 1,600cc pay 1p more with prices rising from 11p to 12p per mile, while petrol vehicles with engines between 1,401cc and 2,000cc will also increase by 1p, from 14p to 15p per mile.
However, the advisory electricity rate for fully electric company cars remains unchanged at 7p per mile, HMRC detailed.
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These quarterly reviewed rates are used when employers reimburse employees for business travel in company cars or when employees repay the cost of fuel used for private travel.
For diesel vehicles, HMRC’s new rates show only one change from the previous quarter with this adjustment based on a calculation using an average miles per gallon (MPG) of 56.9 for these vehicles and a fuel price of 146.1p per litre.
Diesel rates for larger engines remain unchanged, with vehicles between 1,601-2,000cc staying at 13p per mile, while the largest diesel engines, namely those over 2,000cc, continue at 17p per mile.
Petrol vehicle rates have been adjusted based on calculations using a mean MPG of 42.3 for these vehicles and a current fuel price of 138.7p per litre.
Petrol rates are calculated based on manufacturers’ information and current fuel prices, with prices for other engines staying the same.
HMRC noted that the EV rate is based on an electrical efficiency of 3.57 miles per kilowatt hour. The calculation also uses a domestic electricity cost of 25.24p per kilowatt hour.
When these figures are combined, they produce a rate per mile of 7.06p, which is rounded to 7p for the advisory electric rate, the Government agency stated.
The AER is calculated using electrical price data from the Department for Energy Security and Net Zero and the Office for National Statistics.
The rates for liquefied petroleum gas (LPG) vehicles remain unchanged in the latest quarterly review.
HMRC also confirmed that hybrid cars will continue to be treated as either petrol or diesel cars for advisory fuel rate purposes. This classification depends on the primary fuel type of the hybrid vehicle.
The Government body also stated that previous rates can be used for up to one month from the date any new rates apply. This means the December 2024 rates can still be used until March 31, 2025, if necessary.
According to Cowgills Accountants, the fuel rates are not compulsory but can be used by employers to calculate their fuel mileage rates, using the exact prices paid at the pump and the fuel consumption figures for the vehicles used.
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The firm said: “Provided they have kept sufficient records to show how it has been calculated and can demonstrate that the rate paid does no more than cover the cost of fuel, then there are no tax consequences if this is what the employer chooses to do.”