UK | Advisory Fuel Rates Increase effective 1 June 2025

UK | Advisory Fuel Rates Increase effective 1 June 2025

The HM Revenue and Customs (HMRC) has updated the Advisory Fuel Rates (AFRs) for company cars. The new rates apply from 1 June 2025 and include small changes to the pence-per-mile (ppm) rates for petrol and diesel vehicles. The advisory fuel rates for petrol, LPG, diesel, and electric cars are as follows:

Petrol Rates
Engine Size (cc)          Advisory Rate
Up to 1400                12 pence
1401 to 2000            14 pence
Over 2000                 22 pence

LPG Rates
Engine Size (cc)          Advisory Rate
Up to 1400                11 pence
1401 to 2000            13 pence
Over 2000                 21 pence

Diesel Rates
Engine Size (cc)          Advisory Rate
Up to 1600                11 pence
1601 to 2000            13 pence
Over 2000                 17 pence

Electric Rates
  1. For electric cars, the rate per mile remains at 7 pence.
Key Notes
  1. The rates apply from 1 June 2025 to 31 August 2025.
  2. HMRC updates these rates quarterly, with the next change expected from 1 September 2025.
  3. Old rates may be used up to 1 month from the effective date of the new rates.
  4. These rates must only be used for company cars.
  5. Hybrid cars are treated as either petrol or diesel cars.
When to Use Advisory Fuel Rates?
Business Travel Reimbursements
  1. Employers can use these rates to reimburse employees for fuel used on a company car for business purposes.
  2. If the employer’s reimbursement rate is equal to or below the advisory rate, there will be no tax and Class 1A National Insurance to pay.
  3. If the employer’s reimbursement rate exceeds the advisory rates and the employer cannot prove the fuel cost per mile is higher, the excess will be treated as taxable income and also subject to Class 1A National Insurance.
Private Travel Repayments
  1. These rates can also be used if employees are required to repay the cost of fuel used for private travel.
  2. To avoid a fuel benefit charge, employers must accurately track all private travel mileage and ensure employees reimburse the full cost of private fuel using the correct or higher rate. Advisory rates are not mandatory if employers can demonstrate that employees fully cover the cost of private fuel by repaying at a lower mileage rate.
Using Alternative Rates
Employers may use their own rates if these better reflect specific circumstances, such as improved fuel efficiency of vehicles or higher business travel costs compared to the guideline rates. This flexibility helps ensure fair and accurate reimbursements where AFRs don’t reflect real usage or costs.
 
Click here to view the rates on the HMRC website.

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