Man filling up company car with fuel
Filling up with fuel - new business mileage rates to be used for company cars start from September 2018
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HMRC has announced its latest approved company car mileage rates that can be used to avoid being charged benefit in kind taxation.

The latest company car business mileage rates, known as the HMRC Advisory Fuel Rates, or AFRs for short, commence from September 01, 2018.

Drivers of smaller-engined petrol company cars see their mileage rates increase by 1p per mile; as do diesel car drivers with engine sizes 1.6-2.0 litres.

The biggest change, however, is the introduction for the first time of company car mileage rates for electric cars. These have been set at 4p per mile. These rates apply to fully electric cars – not Plug-in Electric Vehicles (PHEVs). There is no car fuel benefit tax implication for using these figures, since HMRC does not consider electricity a fuel.

Using the new mileage rates

You can continue to claim the previous pence per mile AFRs for up to one month following the commencement date of the new rates.

If you drive a hybrid company car, then the business mileage rates reflect the appropriate petrol or diesel AFRs depending on whether you have a petrol or a diesel hybrid.

Company car business  mileage rates are used to claim back business mileage in company cars; or to repay private mileage if all fuel is provided by the company – this avoids car fuel benefit tax.

The updated company car business mileage rates are listed below

Petrol: Company car mileage rates from September 01, 2018

  • Engine size 1400cc or less: 12p – up 1p
  • 1401cc to 2000cc: 15p – up 1p
  • Over 2000cc: 22p – unchanged

Diesel: Company car mileage rates from September 01, 2018

  • Engine size 1600cc or less: 10p – unchanged
  • 1601cc to 2000cc: 12p – up 1p
  • Over 2000cc: 13p – unchanged

Hybrid powered company car mileage rates

  • Drivers of petrol/electric hybrid company cars should use the petrol rates.
  • Drivers of diesel/electric hybrid cars should use the diesel rates.

Advisory electricity company car mileage rate from September 01, 2018

  • Fully electric car – 4p

LPG fuelled company car mileage rates from September 01, 2018

  • Engine size 1400cc or less: 7p – unchanged;
  • 1401cc to 2000cc: 9p – 1p increase;
  • Over 2000cc: 13p – 1p decrease

HMRC reviews the company car business mileage rates every quarter.

The current figures are calculated using the latest petrol and diesel prices from Department for Business, Energy & Industrial Strategy (August 14, 2018), LPG (UK Average) from the Automobile Association (AA) website (July 2018). Figures are weighted to reflect sales to business and adjusted downwards to reflect real driving economy conditions.

What about business mileage rates for private cars on business?

The Advisory Fuel Rate company car business mileage rates are to be used by company car drivers and should not be confused with Approved Mileage Allowance Payments, known as AMAPs.

These AMAP payments are the tax-free pence-per-mile rates applicable only when drivers use their private cars for business purposes.

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  1. When a company pays for the fuel and charges for private mileage do they have to adhere to the advisory rates or can they charge what they wish?
    For example for my company car the AFR is 11p a mile. My company wish to charge 26p a mile and justify this by saying the 15p above the AFR is to help with lease cost, maintenance and tyres etc.
    Is there any way around paying more than double? An HMRC advisor told me I could claim tax relief on the 15p above the the AFR but I’m not convinced this advice was correct?

    Hello David
    Thank you for your enquiry. We would follow the HMRC advisor’s advice. The AFR payments exist to ensure there is no benefit in kind incurred. So if a company paid more than the AFR rate for business mileage, the amount above the rate would be subject to income tax.

    Therefore if your company is charging you above the AFR rate for private mileage,then tax relief is available. Hopefully, the advisor explained to you how to get your tax relief. But if not, this Mileage Allowance Relief article should help you.

    Ralph Morton, editor

  2. My employer has worked out his own rates based on the cost of fuel and applied it to the private miles element of our employees’ mileage.

    His rate is LESS than the AFRs. Is he right to do this or should I insist he uses the AFRs as a minimum to avoid any possible issue with BIKs?

    I look forward to hearing your thoughts :)

    Thanks for your comment – your employer can do this and as long as they are less than the AFRs there are no BIK implications.
    Ralph Morton, Editor


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