HM Revenue & Customs (HMRC) has unveiled a significant change affecting thousands of drivers across the United Kingdom. As of June 1, new fuel rates for company cars will be implemented nationwide, impacting electric, diesel, hybrid, petrol, and LPG vehicles.
Darren Millar, an expert from BigWantsYourCar.com, shed light on the implications of these changes for drivers:
Understanding Advisory Fuel Rates
Advisory Fuel Rates are pivotal in managing the costs associated with company car usage. These rates, reviewed quarterly by HMRC, establish a standardized framework for reimbursing employees for business travel or calculating repayments for private fuel use. By adhering to these rates, employers ensure compliance with tax regulations while efficiently managing company car expenses.
New Advisory Fuel Rates Effective from June 1
The updated Advisory Fuel Rates, effective from June 1, introduce an advisory electric rate for fully electric cars, marking a significant development in fuel reimbursement practices. Petrol cars, categorized by engine sizes, will now incur rates ranging from 14p to 26p per mile, while LPG cars will face rates between 11p and 21p per mile. Diesel cars, also categorized by engine size, will have rates ranging from 13p to 20p per mile.
While hybrid vehicles offer a blend of fuel efficiency and environmental benefits, their reimbursement still aligns with petrol and diesel cars. Employers and employees driving hybrid cars must adhere to the applicable petrol or diesel advisory rates based on the vehicle’s fuel type and engine size. This ensures consistency and compliance with tax regulations while accommodating the increasing popularity of hybrid technology in corporate fleets.
Transition to Electric Vehicles
“Fully electric cars will now be reimbursed at a rate of 8p per mile, a 2p reduction from December 2023. This prompts concerns from drivers regarding the adequacy of the current Advisory Electric Rate (AER) policy, as it may leave many drivers inadequately compensated. It is evident that the AER requires significant revisions to ensure fair compensation for all affected individuals.
“Employers and employees are urged to adapt to these changes and integrate electric rates into their reimbursement policies, fostering the use of eco-friendly transportation solutions.
The introduction of these new fuel rates underscores HMRC’s commitment to adapting tax regulations to accommodate evolving trends in vehicle technology and promote sustainable transportation practices across the UK.
