Tax & Accounting News
Changes to tax-free fuel rates
28/07/2011
As of 1 June 2011, HMRC has changed the ‘fuel only’ rates, which apply to employees who claim solely for the cost of fuel used on business journeys or reimburse their employer for any fuel used on private travel, including the return commute to work.
The company car business mileage rates, known as the Advisory Fuel Rates (AFRs), have been changed in the past at regular six monthly intervals by HMRC. However, rapidly increasing fuel prices have often left company car drivers out of pocket for the business mileage covered in their company cars between the changes.
Because of the rise in fuel prices, HMRC says that as of next year, the AFRs will change on the first days of March, June, September and December.
There is a risk that company car drivers paying slightly less for their private travel than the official rate might be taxed on the full fuel scale benefit, which could add up to £2,500 to their annual bill, plus costing their employer added National Insurance on the fuel benefit.
Provided that all of the private mileage has been properly identified, HMRC will not levy fuel benefit charge tax or demand (Class 1A) National Insurance contributions if you use the new AFRs from the list below. (New rate in bold. Previous rate starred after the brackets). For hybrid cars, use the petrol figures.
Advisory Fuel Rates from June 2011 for petrol and LPG cars
Engine size 1400cc or less: 15p (petrol) *14p; 11p (LPG) *10p
1401cc to 2000cc: 18p (petrol) *16p; 13p (LPG) *12p
Over 2000cc: 26p (petrol) *23p; 18p (LPG) *17p
Advisory Fuel Rates from June 2011 for diesel cars
Engine size 1600cc or less: 12p (was 13p)
1601cc to 2000cc: 15p (was 13p)
Over 2000cc: 18p (was 16p)
Any employee who repays their employer for fuel used on private travel should increase their payments immediately (unless using diesel cars of 1,400cc or less) backdated to 1 June 2011. By the same token, any employee claiming business mileage from that date may claim additional amounts where appropriate.
