Advisory Fuel Rates for company cars

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New Rates apply from 1 December 2020

HM Revenue and Customs (HMRC) have published their quarterly advisory fuel rates which are effective from 1 December 2020 and apply to company car users.  Employers can continue to use the previous rates for up to one month after the new rate becomes effective if they choose.

The rates are reviewed on a quarterly basis for 1 March, 1 June, 1 September, and 1 December.

There are two ways in which employers can use the published rates:

  1. To reimburse a company car users for business mileage
  2. Or to set a mileage rate for employees where they are required to reimburse the employer for the cost of fuel for private travel. This would enable them to avoid the fuel scale benefit.

Providing an employer does not pay more than the advisory fuel rates for business miles according to the engine size of the vehicle and type of fuel, then there is no taxable profit or Class 1A NIC liability.

But if an employer pays more than the advisory fuel rates, the excess is treated as taxable profit and is also subject to Class 1 NIC.

Fully Electric Cars

The advisory electricity rate for fully electric cars is 4 pence per mile.

Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates.  See below.

Advisory Fuel Rates 1 December 2020

Engine sizePetrol – rate per mileLPG – rate per mile
1400cc or less10 pence7 pence
1401cc to 2000cc11 pence8 pence
Over 2000cc17 pence12 pence
Engine sizeDiesel – rate per mile
1600cc or less8 pence
1601cc to 2000cc10 pence
Over 2000cc12 pence

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