1st September: Update to Advisory Fuel Rates for Company Cars

From 1^st September 2022, to reflect the ongoing rise in fuel prices, there are increases in the advisory fuel rates for employees’ using a company car.

These new rates apply to employees using a company car and are to be used in the following circumstances:

• When reimbursing employees for business travel in their company cars

• When employees need to repay the cost of fuel used for private travel

Please note, you can continue to use the previous rates for up to one month from the date the new rates apply.

Reimbursing Employees for Company Car Business Travel

So long as the mileage rate you pay employees is no higher than the Advisory Fuel Rates set out below, there is no Class 1A National Insurance Contribution to pay and the employee will not be taxed on the fuel benefit.

Employees to Repay the Cost of Fuel Used for Private Travel

As long as any private fuel is fully reimbursed by the employee – all private travel mileage is recorded and you use the correct rate – there will be no fuel benefit charge.

It’s important that employees are paid within these HMRC rates to avoid a tax charge arising.

New Advisory Fuel Rates from 1st September 2022

Where the employer does not pay for any fuel for the company car, these are the amounts that can be reimbursed for business journeys from 1^st September 2022. Any change from the last update in June 2022 is shown in brackets.

Petrol

• Up to 1400cc – 15p per mile (+1p)

• 1401 to 2000cc – 18p per mile (+1p)

• Over 2000cc – 27p per mile (+2p)

Diesel

• Up to 1600cc – 14p per mile (+1p)

• 1601 to 2000cc – 17p per mile (+1p)

• Over 2000cc – 22p per mile (+3p)

LPG

• Up to 1400cc – 9p per mile (no change)

• 1401 to 2000cc – 11p per mile (no change)

• Over 2000cc – 17p per mile (+1p)

Hybrid cars are treated as either petrol or diesel cars for AFR purposes.

The advisory electricity rate (AER) for pure electric cars remains at 5p per mile.

For more information, or to discuss your own business situation, contact The Uncommon Accountants today.

You can also find out more about how these rates are calculated and how to apply them on the Government’s website.

Employees using their own car

Where employees use their own car for business journeys, the tax-free reimbursement remains 45p per mile plus 5p per passenger, and an employer can reclaim input VAT on such payments based on the figures above.

For example, if an employee drives their own petrol 1600cc car for business journeys and is reimbursed 45p per mile, then 18p per mile is deemed to represent the cost of petrol. The employer may claim 3p per mile (1/6) as input VAT, provided the employee submits a fuel receipt to support the claim.