Advisory Fuel Rates for company cars

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 size	Petrol – rate per mile	LPG – rate per mile
1400cc or less	10 pence	7 pence
1401cc to 2000cc	11 pence	8 pence
Over 2000cc	17 pence	12 pence

Engine size	Diesel – rate per mile
1600cc or less	8 pence
1601cc to 2000cc	10 pence
Over 2000cc	12 pence