If you drive for business, it's vital to closely watch your mileage rates, because HMRC has set strict rates against which expenses are claimed for company cars. Here's what you need to know.
What are the mileage rates for company cars and vans?
An employee driving a company-owned vehicle on their own fuel is reimbursed by their employer using advisory fuel rates (AFRs). They apply to each mile driven on business but can also be used by employers to recoup the cost of private journeys driven using company fuel.
The HMRC-approved per-mile rates are reviewed and, if necessary, adjusted every quarter. So to ensure that nobody is left out of pocket, it's important that employees as well as employers keep up to date with them.
HMRC publishes nine AFRs, with different rates for petrol, diesel and LPG-fuelled vehicles, each based on their engine capacity. They're calculated using a combination of average fuel efficiency figures for vehicles registered to fleets and current forecourt prices across the UK. The resulting figure is rounded to the nearest whole penny.
Petrol cars and vans
| Engine size | Average Efficiency | Cost per mile | AFR |
|---|---|---|---|
| Up to 1400cc | 49.5mpg | 13.7p | 14p |
| 1401-2000cc | 42.1mpg | 16.2p | 16p |
| Over 2000cc | 26.7mpg | 25.5p | 26p |
Diesel cars and vans
| ENGINE SIZE | AVERAGE EFFICIENCY | COST PER MILE | AFR |
|---|---|---|---|
| Up to 1600cc | 56.7mpg | 12.6p | 13p |
| 1601-2000cc | 48.0mpg | 14.9p | 15p |
| Over 2000cc | 36.3mpg | 19.7p | 20p |
LPG cars and vans
| ENGINE SIZE | AVERAGE EFFICIENCY | COST PER MILE | AFR |
|---|---|---|---|
| Up to 1400cc | 39.6mpg | 11.3p | 11p |
| 1401-2000cc | 33.7mpg | 13.3p | 13p |
| Over 2000cc | 21.3mpg | 21.0p | 21p |
How do mileage rates work for electric and hybrid cars?
Electricity is taxed differently from other fuels, and HMRC has a much simpler system for reimbursing EV drivers.
From 1 June 2024, the Advisory Electric Rate (AER) is 8p per mile for all electric cars, regardless of their size and efficiency. The rate is based on an average efficiency figure for all fleet-owned vehicles and the cost of home charging. Following a year of rising energy prices, it's now adjusted every quarter.
There are no mileage rates for hybrid cars, whether they’re the ‘self-charging’ or plug-in type. Instead, HMRC advises fleets to reimburse drivers using the AFR system, with reference to the vehicle's engine size and primary fuel type.
What if mileage rates don't cover real-world costs?
HMRC will allow fleets to adjust the mileage rates if they're leaving drivers out of pocket or actual travel costs are much lower – for example, if a plug-in hybrid is being charged regularly. However, they have to prove that the rates they are using are accurate, and any excess can be taxed as additional income or profit.
Employers also don’t have to use AFRs if they can prove that employees reimburse them for the full cost of private journeys instead of calculating it based on mileage.
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If you look at what the cost per litre of fuel was in 2016 compared to today ( £1.02 vs £1.49), it shows what a joke the MAP rates are.
Thats before taking into account the increased servicing costs from abysmal road condidtions in the last 8 years (MAP is supposed to cover fuel/maintenance per mile).
Likewise the tax allowance for home working is worth around £130 p.a. and hasnt changed in donkeys years....the cost of energy having tripled or quadrupled in that time.
Fair and equitable....dont think so!