If you have employees who use a company car, you’ll need to be aware that HMRC has just published its new advisory fuel rates (AFRs). They came into effect on 1st September 2023 and will next be updated on 1st December.

Advisory fuel rates are used in two ways. You can use them to reimburse employees for business travel in their company cars. Employees can also use them to repay you the cost of fuel used for private travel.

Why use advisory fuel rates?

If you pay employees using the relevant advisory fuel rate (or lower), then there’s no taxable profit or Class 1A National Insurance to pay. If you pay a higher rate and you can’t prove that the fuel cost per mile is higher, there’s no fuel benefit charge as long as the mileage payments are only for business journeys. However, you need to treat the excess payment as taxable profit and as earnings (for National Insurance purposes). Likewise, employees don’t have to pay a fuel benefit charge as long as they correctly account for all private travel mileage and repay the fuel used.

How advisory fuel rates are calculated

Advisory fuel rates are recalculated every quarter (on the first day of March, June, September and December).

HMRC uses data from a number of different sources to calculate MPG or, in the case of electric cars, pence per KWh. These sources include manufacturers’ information, the latest petrol and diesel prices and electrical price data. The calculated rates per mile are either rounded down or rounded up to the nearest penny.

What are the current rates?

Below are the current advisory fuel rates per mile, which apply from 1st September to 31st November 2023. We’ve also included the previous rates in brackets for comparison. As you can see, the falling cost of fuel is helping to lower the AFR for petrol, diesel and LPG vehicles, while higher electricity costs have nudged up the AFR for fully electric cars.

Engine size Petrol LPG
1400cc or under 13p (13p) 10p (10p)
1401cc to 2000cc 16p (15p) 12p (12p)
2000cc + 25p (23p) 19p (18p)


Engine size Diesel  
1600cc or under 12p (12p)
1601cc to 2000cc 14p (14p)
2000cc + 19p (18p)


The advisory fuel rate for fully electric cars is now 10p per mile.

What about hybrid company cars?

If you have hybrid vehicles, these are treated as petrol or diesel cars for advisory fuel rates. You should not use the electric AFR.

A word about electric vehicles

If you are thinking of switching your fleet to electric vehicles, talk to us about the tax implications: we can advise you on ways to save money. For example, we can not only talk you through the tax benefits of leasing electric cars, but we can also show you how to offset the full cost of a new vehicle. To find out more, simply fill out the contact form below or give us a call on 0800 6520 025.

Need further advice on any of the topics being discussed? Get in touch and see how we can help.

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