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HMRC has released the most recent advisory fuel rates (AFR), applicable starting 1 June 2023. These rates dictate how much can be reimbursed to employees using company cars for business purposes and the amount employees must repay for the private use of the vehicle.
There have been some changes in these rates. The rate for diesel cars has been lowered, while the rates for unleaded fuel have not been changed. Meanwhile, the rates for Liquefied Petroleum Gas (LPG) have slightly increased compared to those announced in March 2023.
The advisory electric rate (AER) stays the same for fully electric cars, at 9p per mile. Like the AFR, the AER will be reviewed every quarter, with the next update expected on 1 September 2023.
It’s important to note that you can still use the previous rates for up to a month after the new June rates have been implemented. Here are the new AFRs for June 2023:
- For petrol engines of 1400cc or smaller, the rate is 13p per mile, and for LPG, it’s 10p per mile.
- For petrol engines ranging from 1401cc to 2000cc, the rate is 15p per mile, and for LPG, it’s 12p per mile.
- For petrol engines larger than 2000cc, the rate is 23p per mile, and for LPG, it’s 18p per mile.
As for diesel engines:
- Engines of 1600cc or smaller have a rate of 12p per mile.
- Engines between 1601cc to 2000cc are rated at 14p per mile.
- Engines larger than 2000cc have a rate of 18p per mile.
When these advisory rates are used to reimburse employees for business travel, HMRC acknowledges that there’s no taxable profit or Class 1A National Insurance to be paid. This means this reimbursement is not considered a ‘Benefit in Kind’ or taxable.
On the other hand, if employees are using company cars for private travel, they must repay the fuel used as per these rates. If the company pays for private fuel for an employee, this is considered a Benefit in Kind and is subject to taxation. To work out a company car’s Benefit in Kind value, you multiply its list price by a percentage banding based on its CO2 emissions. This benefit value can be reduced if the employee contributes towards the car’s cost or if the car is unavailable for part of the tax year.