As we fast approach 2025, it’s worth noting that HMRC has updated the Advisory Fuel Rates (AFRs) for company cars, effective from 1st December.

These rates are crucial for businesses and employees using company vehicles, providing a standardised approach to calculating tax-efficient mileage reimbursement.

What Are Advisory Fuel Rates?

Advisory Fuel Rates are fixed pence-per-mile rates set by HMRC that help employers reimburse employees for business travel in company cars. They also guide employees on how much to repay for private mileage using a company vehicle.

Key Changes for December 2024

The latest HMRC fuel rate update sees reductions across most vehicle categories:

Petrol Vehicles

• Up to 1400cc: Reduced from 14p to 12p per mile
• 1401 to 2000cc: Decreased from 16p to 14p per mile
• Over 2000cc: Dropped from 26p to 23p per mile

Diesel Vehicles

• Up to 1600cc: Reduced from 13p to 11p per mile
• 1601 to 2000cc: Decreased from 15p to 13p per mile
• Over 2000cc: Dropped from 20p to 17p per mile

Alternative Fuel Types

• LPG rates: Remained unchanged at 11p per mile for vehicles up to 1400cc, 13p per mile for vehicles with 1401-2000cc engines, and 21p per mile for engines greater than 2000cc.
• Fully electric cars: Slightly reduced from 8p to 7p per mile.
• Hybrid vehicles: Classified under petrol or diesel rates accordingly.

Important AFR Compliance Considerations

These rates are not merely suggestions but critical for business tax compliance.

Employers must ensure:

• Employees are reimbursed at or below these HMRC-approved rates
• Any excess payments could trigger potential tax charges
• Previous quarter’s rates can be used for one month after the new rates take effect

Transition Period

From 1st December 2024, the new rates apply. However, September 2024’s rates can still be used until 31st December 2024, providing a smooth transition for businesses updating their systems.

Why Advisory Fuel Rates Matter

Accurate mileage reimbursement is more than an administrative task – it’s a crucial aspect of financial management that impacts both employer and employee tax liabilities.

By adhering to HMRC’s December 2024 Advisory Fuel Rates, businesses can:

• Ensure tax efficiency
• Minimise the risk of unexpected tax complications
• Provide transparent and fair compensation for business travel

Navigate Fuel Rate Changes With Hamlyns

Navigating these rates and understanding their implications can be complex. At Hamlyns, our expert tax advisors can help you interpret these changes, ensure compliance, and develop robust mileage reimbursement strategies tailored to your business.

Need personalised advice on Advisory Fuel Rates or company car tax efficiency? Contact our team today.

Disclaimer: This information is current as of December 2024 and is subject to HMRC updates. Always consult a professional for specific financial guidance.