HM Revenue & Customs (HMRC) has published new advisory fuel rates for company car drivers, effective 1 March 2025. These rates guide the reimbursement of fuel costs for business travel in company cars. This article offers a concise overview of the advisory fuel rates applicable from this date.

What Are Advisory Fuel Rates?

Advisory fuel rates are figures published by HMRC that employers may use when reimbursing employees for business mileage in company cars. While these rates serve as a reference, they are not mandatory. Employers can choose to calculate their reimbursement rates based on actual fuel costs and vehicle fuel consumption.

Employers opting to use their rates must maintain accurate records demonstrating that the amount reimbursed does not exceed the fuel cost. If sufficient evidence is provided, there are no tax implications for using an alternative calculation.

How Have the Rates Changed from 1 March 2025?

The key changes to advisory fuel rates from 1 March 2025 include:

• A 1p increase for petrol vehicles with engine sizes between 1,401cc and 2,000cc.
• A 1p increase for diesel vehicles up to 1,600cc.
• No changes to other petrol or diesel rates.
• The advisory electricity rate for fully electric cars remains at 7p per mile.

The Rates from 1 March 2025

Below are the updated advisory fuel rates applicable from 1 March 2025:

*For fully electric cars only.

Additional Considerations

• Previous advisory fuel rates may be used for up to one month after the new rates take effect, allowing the old rates to be used until 31 March 2025.

• HMRC sets advisory fuel rates, which provide a standard method for reimbursing company car drivers for business fuel expenses.

• These rates can also be applied when employees reimburse their employers for private fuel use.
• Advisory fuel rates do not apply to vans.
• The electricity rate for fully electric vehicles is reviewed quarterly, with adjustments made as necessary.
• Hybrid cars are treated as either petrol or diesel vehicles for advisory fuel rates.
• Employers can reclaim input VAT on fuel reimbursements, but only if the employee provides a valid VAT receipt.

Conclusion

The advisory fuel rates from 1 March 2025 provide updated reimbursement figures for company car drivers using petrol, diesel, LPG, or electric vehicles. While these rates serve as a useful guideline, employers may choose to calculate their own rates, provided they maintain adequate records. Understanding these rates is essential for ensuring compliance with HMRC guidelines while effectively managing fuel expenses in a business setting.