Company car drivers will see the amount of cash they can claim increase by an average of 2p per mile after Her Majesty’s Revenue and Customs (HMRC) published new advisory fuel rates (AFRs).
The new rates, which businesses use to repay drivers for fuel used on business mileage, take effect from Wednesday (June 1).
HMRC has increased the rates by 2p per mile for diesel cars with an engine size of 2,001cc or greater, from 16p to 18ppm.
It has also introduced an extra rate for diesel, with the lowest band catering for an engine capacity up to and including 1,600cc. However, the pence per mile rate here falls from 13ppm to 12ppm, but in the new intermediate band of 1,601cc-2,000cc it has increased from 13ppm to 15ppm.
For petrol cars with an engine size over 2,000cc, the rate has increased by 3ppm, from 23p to 26ppm, and from 16p to 18ppm for cars with an engine size between 1,401cc to 2,000cc. For petrol engine cars with an engine of 1,00cc or less it has increased from 14ppm to 15ppm.
LPG rates have increased across the board by 1ppm.
AFRs will now be reviewed on a quarterly basis, starting from June, but as a result of this increased frequency, HMRC has withdrawn its commitment to make interim changes if fuel prices vary by 5% or more.
It has also reduced the average miles per gallon for petrol and diesel by 15% rather than 10% in alignment with the approach used by the Energy Saving Trust.
The move reflects greater efforts by car manufacturers to optimise vehicles for improved fuel consumption in official tests, which are then more difficult to replicate in real-world conditions on the road.
The new rates are shown below (old rates in brackets):
1400cc or less 15p (14p)
1401cc to 2000cc 18p (16p)
Over 2000cc 26p (23p)
1600cc or less 12p (13p)
1601cc to 2000cc 15p (13p)
Over 2000cc 18p (16p)
1400cc or less 11p (10p)
1401cc to 2000cc 13p (12p)
Over 2000cc 18p (17p)
For further information on AFRs visit the HMRC website.