Advisory Fuel Rates update – March 2024

HMRC has updated the advisory fuel rates that apply to company car users when reimbursing for business travel or when employees repay the cost of fuel used for private travel.

The rates for petrol, diesel, and LPG engines have been adjusted to reflect current fuel prices. The Advisory Electric Rate (AER) for fully electric cars remains at 9p per mile. It is essential to use the correct rates to avoid unexpected tax charges.

Why AFRs matter

Advisory Fuel Rates are calculated by HMRC to reflect the average cost of fuel for different engine sizes. If an employer reimburses an employee for business mileage in a company car at a rate higher than the AFR, the excess is treated as taxable earnings. Conversely, if an employee uses a company car for private mileage and fuel is provided by the employer, the employee must reimburse the employer at the AFR rate to avoid a fuel benefit charge.

Hybrid and electric vehicles

For plug-in hybrid cars, the AFR for the relevant petrol or diesel engine size must be used; they do not qualify for the electric rate. Fully electric vehicles are covered by the separate Advisory Electric Rate (AER). The AER is reviewed quarterly alongside the standard AFRs to ensure it accurately reflects the fluctuating cost of domestic and public charging.

Implementation and compliance

Employers can use the previous quarter's rates for up to one month from the date the new rates apply, allowing time to update payroll and expenses systems. Ensuring that mileage claims are accurately recorded and reimbursed at the correct rate is a frequent area of focus during HMRC compliance checks, so maintaining robust records is essential.