Do you have a company car or, does your business allow it’s employees to have a company car? The new company car advisory fuel rates have been published and took effect from the 1st of September 2022.
What are advisory fuel rates?
Advisory fuel rates (AFR’s) are rates set by the government to assist a business in reimbursing or, being reimbursed fuel costs for company cars.
These mileage rates apply where a company must repay an employee for travel related to business in a company car or, when an employee should repay the company for personal travel (not business related travel) in a company car.
When to use the mileage rates:
- To reimburse employees for business travel in their company cars
- Need employees to repay the cost of fuel for personal travel in a company car
From the 1st of September 2022, new advisory fuel rates were set out however, guidance states that you can ‘use the previous rates for up to one month from the dates the new rates apply’. Note, the rates only apply to employees using a company car.
Advisory fuel rates for on or after 1st of December 2022:
| Engine size | Petrol |
| 1400cc or less | 14p |
| 1401cc – 2000cc | 17p |
| Over 2000cc | 26p |
| Engine size | LPG |
| 1400cc or less | 10p |
| 1401cc – 2000cc | 12p |
| Over 2000cc | 18p |
| Engine size | Diesel |
| 1600cc or less | 14p |
| 1601cc – 2000cc | 17p |
| Over 2000cc | 22p |
Guidance from the HMRC states these rates apply when you either:
- Reimburse employees for business travel in their company cars
- Require employees to repay the cost of fuel used for private travel
These rates shouldn’t be used in any other circumstances
It is 8p per mile for the Advisory Electricity Rate for fully electric cars, this has risen from 5p previously.
How are fuel rates calculated?
HMRC review rates quarterly on the following dates:
- 1stMarch
- 1stJune
- 1stSeptember
- 1stDecember
Calculating rates
The ‘mean miles per gallon’ (MPG) is taken from manufacturers’ information which also takes into account annual sales to businesses. For liquefied petroleum gas (LPG), the MPG is 20% lower than for petrol due to the lower volumetric energy density.
The latest petrol and diesel prices, are taken from the Department for Business, Energy and Industrial Strategy and the LPG average is from the Automobile Association website.
Mileage allowance payments
Mileage allowance payments (MAPs) are when you pay your employee for using their own vehicle for business journeys. You are entitled to pay your employee a certain number of MAPs per year, without telling HMRC. This is known as an ‘approved amount’.
To calculate the approved amount, multiply your employee’s business travel miles for the year, by the rate per mile (in the table above). You can also use this MAPs working sheet for assistance.
Tax rates per business mile:
| First 10,000 miles | Above 10,000 miles | |
| Cars and vans | 45p | 25p |
| Motorcycles | 24p | 24p |
| Bikes | 20p | 20p |
For anything that is over the approved amount, you must do the following:
- Report on form P11D
- Add anything that is above the approved amount to the employees pay and then deduct and pay tax as normal
For anything below the approved amount, you do not have to report this to the HMRC but:
- Your employee can get a tax relief known as mileage allowance relief (MAR) on the unused balance of the approved amount
- You can make separate optional reports to HMRC of any such unused balances under the Mileage Allowance Relief Optional Reporting Scheme (MARORS)
If you would like assistance when it comes to managing your business mileage payments, please get in touch with the Cooper Accounting team today.
