HMRC’s latest rule adjustment has changed the recommended reimbursement rates for employees reclaiming business travel expenses in company vehicles. The decision to cut advisory fuel rates will be welcome news for many professionals who travel for work.
Advisory Fuel Rates: What’s Changed?
From 1 March 2024, most employers and employees will benefit from reduced advisory fuel rates by 1p and 2p per mile for petrol and diesel engines, respectively. However, LPG engine rates for lower cc vehicles increased by 1p per mile and 3p for 2000cc cars. These new rates can only be used to reimburse employees for business travel in their company cars, as different fuel rates apply for other vehicle types.
What Are Advisory Fuel Rates?
In recent years, it’s become increasingly popular for businesses to provide a mileage allowance for employees who drive company vehicles. Employers are not obliged to pay a mileage allowance; however, doing so is tax-free (within the limits) and encourages business productivity.
Employers should use the new rates in the following circumstances and at no other time:
- Reimburse employees for business travel in their company cars.
- Need employees to repay the cost of fuel used for private travel.
What Rates Apply For Other Vehicles?
The advisory reimbursement rate for fully electric cars will be 9p per mile. Hybrid cars are treated as petrol or diesel cars for advisory fuel rates.
If you use your own car or van for work, you can be reimbursed a maximum of 45p per mile for the first 10,000 miles and 25p per mile thereafter. This amount was last updated in 2011.
The rate for employees using motorcycles is 24p per mile. Where an employer uses their bicycle for work, the approved rate is 20p per mile. These amounts have not been updated since at least 2001.
An additional 5p per mile can be paid per passenger, provided that the journey is also business travel for the passenger.
Support With Advisory Fuel Rates
The world of tax-free fuel reimbursements can be difficult to navigate, as the rates are updated frequently. Whether you’re an employer looking to reimburse fuel costs or an employee wanting to understand the industry norms better, get in touch with the expert team at Digital Tax Matters. Our highly experienced team of accountants are perfectly placed to guide you through HMRC’s new rules and make the most of your business travel.