Advisory Fuel Rates: All You Need to Know
Mileage Claims
4 Min Read

Advisory Fuel Rates: All You Need to Know

What are Advisory Fuel Rates?

Advisory Fuel Rates (AFR) are the HMRC’s recommended repayment rates for employers to use when their employees use company cars.

The most recent HMRC advisory fuel rates are:

Engine SizePetrolDieselLPG
1400cc or less11p10p7p
1401cc to 2000cc14p11p8p
Over 2000cc21p13p13p

When to use Advisory Fuel Rates?

Companies can apply these rates only when employees are using company cars – not their own personal car for business trips.

You can check out the difference between company cars vs. personal cars for business use on our other post.

AFRs are be used when drivers are claiming the fuel expense for their business mileage. This can be either to:

  • Reimburse your employees for their business mileage in company cars
  • Repay the cost of fuel used for private travel by your employees

Why use Advisory Fuel Rates?

These rates are in place to help companies keep compliant regarding taxing their employers and Class 1A National Insurance. 

There is a certain tax that drivers need to remain compliant themselves however, and not the employer. This is called Company Car Tax.

Company Car Tax

Companies using a company car is seen as a Benefit in Kind (BiK) – an added bonus on top of a salary – for employees.

It’s a great incentive. It boosts morale which has shown results in boosting productivity at work.

However – drivers will have to pay company car tax if they use it for personal journeys. This includes travelling to and from work.

The amount of tax you pay depends on:

  • The CO2 emissions
  • The value of the car, also known as the P11D value
  • How often you use the vehicle

When do Advisory Fuel Rates Change?

Advisory Fuel Rates change every quarter when the HMRC review them: March, June, September and December of every year.

You can subscribe below to get all AFR updates straight to your inbox, so you never miss any changes.

How are Advisory Fuel Rates Calculated?

Advisory Fuel Rates are calculated from fuel prices and miles per gallon figures.

Saying that – these rates are guidelines only. A company is well within its rights to pay a rate lower than these advised rates, within reason. If company cars are proven to be more fuel efficient, companies could lower reimbursement rates.

Advisory Fuel Rates 2017 and Advisory Fuel Rates 2018

You can find all 2017 and 2018 Advisory Fuel Rates for all fuel types below.

 

Advisory Fuel Rates Petrol

About 81% of company cars use diesel fuel with 19% using other fuel types, mostly petrol. Petrol cars are beneficial for drivers on short business trips, whereas and most companies have high mileage fleets. Included with the low operating cost, petrol is less popular.

 

Advisory Fuel Rates Diesel

Diesel company cars need to pay a surcharge of 4% extra on their company cars, compared to diesel, hybrids and electrics. This is called a Diesel Supplement – in place by the UK government to tackle nitrogen dioxide concentrations.

Diesel cars are currently in the limelight for their toxic emissions. As a result, sales saw a drop of 17% in 2017 and that pattern is continuing in 2018.

 

Advisory Fuel Rates LPG

LPG is more environmentally friendly than other sources of energy. Though all energy sources will release carbon dioxide, when compared to oil, LPG only releases 81% of the carbon dioxide that oil does. Regardless of the benefits, LPG represents such a small proportion of UK vehicles –  only 1% at the start of 2018. As a result, not many places offer to provide LPG, and awareness is fizzling out.

Why do Advisory Fuel Rates Change?

They change with the oil prices. As you can see, all fuel prices went up in 2018. A surge in the value of oil pushed up most prices – at the fastest rate in two decades.

Many people say this has something to do with why electric cars are now representing one in 12 new cars purchased in the UK.

Advisory Electric Rates

An amalgamation of the steady increase in fuel and sales of electric vehicles reaching a record high in 2018, brought  the HMRC to introduce Advisory Electric Rates (AER) for fully electric cars.

This satisfied the want of many companies and drivers asking for reimbursement rates when using fully electric cars as company cars.

These rates aren’t determined by engine size like the AFRs are since they are powered entirely by electricity stored in batteries. So they have one rate for every car: 4p per mile. The claiming process is exactly the same.

It is important to remember – If a company is using electric cars or hybrid cars for their fleet it is essential to set a strategy around how vehicles will be charged.

Hybrid Cars

The number of companies in the UK using plug-in vehicles is estimated to reach half a million units by 2021.

There are many reasons why companies would choose to opt for hybrid cars for company cars. Coming back to company car taxes, most hybrids offer low CO2 emissions. This leads to much-reduced company car tax compared with petrol or diesel rivals.

Wrapping it up

Claiming mileage can sometimes be a grey area. If we have missed something out and you have any more questions you need answering regarding Advisory Fuel Rates, get in touch and we’ll happily help out. Who knows, it might even end up on the page!

For the Skim-readers:

    • Advisory Fuel Rates are guideline rates created by the HMRC for employees using company cars.
    • Drivers can be reimbursed for fuel when driving for business in their company cars.
    • They are in place to prove companies are making no taxable profit and are dependent on fuel type.

And in the meantime, don’t forget to tell your drivers to track their mileage and…

Claim Advisory Fuel Rates

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