HMRC advisory fuel rates for company car users from 1 September

HMRC has published the latest advisory fuel rates (AFR) for company car users, effective from 1 September 2021, increasing mileage rates by 1p or more for all petrol and diesel vehicles

The advisory fuel rates that apply from 1 September 2021 have been increased by 1p per mile for petrol and diesel vehicles with engines of 1400-2000cc reflecting a sharp increase in fuel prices over the last quarter, while 2000cc diesel vehicles see a 2p increase to 15p per mile. The previous rates, effective June 2021, can be used for up to one month from the date the new rates apply.

The rates only apply in the following circumstances:

• reimburse employees for business travel in their company cars; or
• require employees to repay the cost of fuel used for private travel.

These rates cannot be used in any other circumstances. If the rates are used, it is not necessary to apply for a dispensation to cover the payments made.

The advisory electricity rate for fully electric cars is unchanged at 4p per mile. Electricity is not a fuel for car fuel benefit purposes.

When employees are reimbursed for business travel in their company cars, HMRC will accept there is no taxable profit and no Class 1A national Insurance to pay.

Advisory fuel rates from 1 September 2021

Hybrid cars are treated as either petrol or diesel cars for this purpose.

HMRC reviews rates quarterly on 1 March, 1 June, 1 September and 1 December.