Stay updated on the latest hmrc fuel rates petrol diesel , and electric cars. Discover how the new Advisory Fuel Rates (AFR) impact company car users, with increases for some petrol and diesel vehicles, and stable rates for electric. Learn how these changes affect your reimbursements and tax liabilities.
Summary: The HMRC has announced updated Advisory Fuel Rates (AFR) effective March 1st, impacting company car users. Petrol and diesel car owners face new costs, with increases for specific engine sizes. Diesel cars up to 1,600cc see a rise to 12 pence per mile (ppm), while petrol cars between 1,401-2,000cc increase to 15ppm. Electric vehicle rates remain stable at 7ppm. These changes reflect current fuel prices and aim to standardize reimbursements for business travel. Understanding these rates is crucial for accurate expense claims and tax compliance.
HMRC Fuel Rates: Petrol & Diesel Car Owners Face New Costs, Electric Rates Stable
The UK’s roads are set to witness financial shifts for company car users as Her Majesty’s Revenue and Customs (HMRC) rolls out its updated Advisory Fuel Rates (AFR) this week. These changes, effective from March 1st, bring about adjustments in reimbursement rates for petrol, diesel, and electric vehicles, reflecting the dynamic nature of fuel prices and the evolving automotive landscape.
Notably, petrol and diesel car owners will face new costs, while electric vehicle rates remain stable. This comprehensive guide delves into the intricacies of these changes, providing a clear understanding of their implications.
Understanding HMRC’s Advisory Fuel Rates (AFR)
HMRC’s AFRs are crucial for calculating reimbursements for employees using company cars for business travel. These rates also apply when employees need to repay their employer for private travel costs. By standardizing these rates, HMRC ensures fairness and consistency in mileage expense claims.
Why are AFRs Important?
- Tax Compliance: If the mileage rate paid does not exceed the AFR for the specific engine size and fuel type, no taxable profit will be incurred.
- National Insurance: Similarly, there will be no Class 1A National Insurance liability in such cases.
- Fair Reimbursement: AFRs ensure that employees are adequately compensated for their fuel costs.
- Quarterly Reviews: HMRC calculates these rates quarterly, using data from various sources, including the Department for Energy Security and Net Zero and the Office for National Statistics, ensuring they reflect current market conditions.
Key Changes in the Latest AFR Update
The latest update brings specific changes to petrol and diesel rates, while electric vehicle rates remain unchanged.
Diesel Fuel Rate Adjustments
Diesel car owners face varying changes based on engine size.
Diesel Cars Up to 1,600cc: A Penny Increase
- The rate for diesel cars with engines up to 1,600cc has increased from 11ppm to 12ppm.
- This change reflects the current diesel prices, which HMRC has calculated at 146.1 pence per litre.
Diesel Cars 1,601-2,000cc: Rates Remain Unchanged
- Diesel vehicles with engines between 1,601-2,000cc will continue at 13ppm.
- This indicates that the current market price fluctuations have not significantly impacted this engine category.
Diesel Cars Over 2,000cc: Stable Rates
- The rate for diesel cars with engines over 2,000cc remains at 17ppm.
- This stability suggests that the fuel consumption and pricing for larger diesel engines have been consistent.
Petrol Fuel Rate Adjustments
Petrol vehicle owners see a specific change in one engine size category.
Petrol Cars 1,401-2,000cc: Increased Rates
- Cars with engine sizes between 1,401-2,000cc will see their rate increase to 15ppm, up from 14ppm.
- This adjustment reflects the current petrol prices, which HMRC has calculated at 138.7 pence per litre.
Petrol Cars Up to 1,400cc: Rates Remain Stable
- The AFR for petrol vehicles up to 1,400cc remains unchanged at 12ppm.
Petrol Cars Over 2,000cc: Consistent Rates
- Larger petrol cars with engines over 2,000cc continue at the existing rate of 23ppm.
Electric Vehicle Rates: Stability Maintained
Electric vehicle drivers will find their rates unchanged.
Advisory Electricity Rate: 7ppm
- The advisory electricity rate for electric company car drivers remains at 7ppm.
- This rate is calculated based on an electrical efficiency of 3.57 miles per kilowatt hour and domestic electricity costs of 25.24 pence per kilowatt hour.
- This stability highlights the consistency of electric vehicle running costs.
Liquefied Petroleum Gas (LPG) Vehicle Rates
LPG vehicle rates also remain consistent across all engine categories.
LPG Cars Up to 1,400cc: 11ppm
- The rate remains at 11ppm.
LPG Cars 1,401-2,000cc: 13ppm
- The rate continues at 13ppm.
LPG Cars Over 2,000cc: 21ppm
- The rate maintains at 21ppm.
- These LPG rates are calculated based on fuel prices of 98.3 pence per litre.
Hybrid Vehicles: Classification and Rates
- HMRC confirms that hybrid cars will continue to be classified as either petrol or diesel vehicles for AFR purposes, depending on their specific design.
- This ensures that hybrid vehicle owners are reimbursed accurately based on their vehicle’s primary fuel type.
Impact on Company Car Users
The changes in AFRs will have a direct impact on company car users, affecting their reimbursement claims and potential tax liabilities.
Increased Costs for Some Drivers
- Drivers of diesel cars up to 1,600cc and petrol cars between 1,401-2,000cc will face increased costs.
- It is essential for these drivers to adjust their expense claims accordingly.
Stable Rates for Others
- Drivers of other engine sizes and electric vehicles will experience no changes in their reimbursement rates.
- This stability provides consistency and predictability for these users.
How HMRC Calculates AFRs
HMRC’s calculations are based on a comprehensive analysis of various factors.
Fuel Prices
- Current petrol and diesel prices are a primary factor in determining AFRs.
- HMRC uses data from reliable sources to ensure accuracy.
Electrical Efficiency and Costs
- For electric vehicles, electrical efficiency and domestic electricity costs are considered.
- This ensures that the reimbursement rate accurately reflects the cost of charging.
Data from Official Sources
- HMRC relies on data from the Department for Energy Security and Net Zero and the Office for National Statistics.
- These sources provide reliable and up-to-date information.
Practical Implications for Employers and Employees
Employers and employees need to be aware of these changes to ensure accurate expense claims and tax compliance.
Employers’ Responsibilities
- Employers should update their expense policies to reflect the new AFRs.
- They should also communicate these changes to their employees.
Employees’ Responsibilities
- Employees should ensure that their expense claims are accurate and reflect the new AFRs.
- They should also keep records of their business mileage.
Future Outlook and Potential Changes
The automotive industry is constantly evolving, and future changes in fuel prices and technology may lead to further adjustments in AFRs.
Electric Vehicle Adoption
- As electric vehicle adoption increases, HMRC may need to refine its calculations for electric vehicle rates.
- Changes in domestic energy prices will also have an effect.
Fuel Price Volatility
- Fluctuations in global fuel prices may lead to more frequent adjustments in petrol and diesel rates.
- Therefore, it is necessary to stay updated on future HMRC announcements.
Staying Updated on HMRC Announcements
To stay informed about the latest AFRs and other HMRC announcements, it is essential to:
Regularly Check HMRC Website
- The HMRC website is the primary source of information on AFRs and other tax-related matters.
Subscribe to HMRC Updates
- Subscribing to HMRC updates ensures that you receive timely notifications of any changes.
Consult with Tax Professionals
- For complex situations, consulting with a tax professional can provide valuable guidance.
By understanding these changes and staying informed, company car users can ensure accurate expense claims and compliance with HMRC regulations.
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