The HM Revenue & Customs (HMRC) advisory fuel rates, updated quarterly, play an important role in how businesses manage employee reimbursements for company car travel.
With the new rates effective from 1 December 2024, business owners should take note of the changes, which include reductions in petrol and diesel rates and an unchanged rate for electric vehicles.
The new rates from 1 December 2024
Electric cars
The advisory electricity rate for fully electric vehicles remains at 7p per mile, unchanged from previous rates. Key details include:
Petrol and LPG
For petrol and LPG vehicles, petrol rates have decreased by 1p per mile across all engine sizes, while LPG rates remain unchanged:
Diesel
Diesel vehicles have seen a 1p per mile reduction across all engine sizes:
Hybrid vehicles are treated as petrol and diesel for these rates.
When do the rates apply?
Advisory fuel rates are applicable in specific scenarios:
In these cases, HMRC will accept that no taxable profit arises, and there is no Class 1A National Insurance liability.
However, these rates cannot be used for other purposes, such as calculating fuel costs for privately owned vehicles.
What does this mean for your business?
Cost-saving opportunities
For businesses reimbursing employees for business travel, the 1p per mile reduction in petrol and diesel rates may result in lower overall costs.
While the savings may appear small on a per-mile basis, they can add up significantly across a fleet or for employees who cover long distances.
Consideration for electric vehicles
With the electric mileage rate unchanged at 7p per mile, and petrol and diesel rates now lower, businesses may question whether switching to electric company cars is still as cost-effective.
However, when paired with lower maintenance costs and environmental considerations, electric vehicles remain an attractive long-term option for many businesses.
Improved accuracy in compliance
Using HMRC’s advisory fuel rates helps businesses avoid creating taxable benefits for employees or triggering National Insurance obligations.
This simplifies administration and reduces the risk of reporting errors.
To make the most of these changes, ensure your policies are up to date, your employees are informed, and your business is equipped to handle the quarterly updates.
Contact our team today for expert advice on managing employee travel reimbursements and ensuring compliance with the latest updates.
Jim Botton – Pleasure Beach (Skegness)