HMRC has announced that three advisory fuel rates for motorists will be reduced, with the changes taking effect on September 1. The tax authority, which is part of the Labour government's taxation department, reviews these rates every quarter.

The full schedule of rates has been published on HMRC's official website. These rates provide guidance for companies and employees who use company vehicles for work-related travel. The government-set rates are intended to ensure fair and accurate reimbursement for business mileage while simplifying fuel expense claims for those driving company cars.

The three rates being reduced are:

  • Diesel cars with an engine size between 1,601cc and 2,000cc: down from 17p per mile to 16p per mile.
  • Diesel models with an engine between 1,601cc and 2,000cc: down from 23p per mile to 22p per mile.
  • LPG vehicles with an engine greater than 2,000cc: down from 21p per mile to 20p per mile.

Advisory Fuel Rates (AFRs) are the rates established by HMRC to help employers reimburse staff for work-related travel in company vehicles, or for workers to repay the company for fuel used during personal journeys. The rates are designed to reflect current fuel prices across petrol, diesel, LPG, and electric vehicles. HMRC routinely reviews and adjusts these rates to keep pace with fluctuating fuel costs and improvements in vehicle efficiency.

For businesses, AFRs offer a practical way to reimburse staff for mileage without having to calculate fuel expenses separately for each trip. Adopting HMRC's advisory fuel rates simplifies the process for employers when compensating workers who drive company vehicles. By following these prescribed rates, organisations can streamline their administrative tasks and maintain compliance.