Petrol and diesel drivers in the UK are being warned of new fuel rates that take effect today, leading to higher travel costs for many road users.
The updated rates, which are used to calculate company car tax allowances, will increase costs for both petrol and diesel car owners. Diesel cars with engines up to 1,600cc will see a rise of 1p, from 11p to 12p per mile. Similarly, petrol vehicles with engines between 1,401cc and 2,000cc will also see a 1p increase, rising from 14p to 15p per mile. However, the advisory rate for fully electric cars remains unchanged at 7p per mile, as per HMRC’s update.
These quarterly reviewed rates are used when employers reimburse employees for business travel in company cars, or when employees repay fuel costs for personal trips. The new diesel rates reflect an average fuel efficiency of 56.9 miles per gallon (MPG) and a fuel price of 146.1p per litre. Diesel cars with engines between 1,601cc and 2,000cc will remain at 13p per mile, while those with engines over 2,000cc will continue to be charged 17p per mile.
For petrol vehicles, the new rates are calculated using an average MPG of 42.3 and a fuel price of 138.7p per litre. Rates for smaller petrol vehicles remain unchanged. HMRC noted that the electric vehicle (EV) rate is based on an electrical efficiency of 3.57 miles per kilowatt hour, with domestic electricity priced at 25.24p per kilowatt hour. This results in an advisory rate of 7p per mile, rounded from a calculated rate of 7.06p.
The rates for liquefied petroleum gas (LPG) vehicles remain the same as the previous quarter. HMRC also confirmed that hybrid cars will continue to be classified as either petrol or diesel vehicles for fuel rate purposes, depending on their primary fuel type.
Employers can still use the previous rates for up to one month after the new rates take effect. For example, the December 2024 rates can be used until March 31, 2025, if needed.
While the fuel rates are not mandatory, they provide a useful guideline for employers to calculate fuel mileage reimbursements. According to Cowgills Accountants, as long as employers keep accurate records and can prove the rates cover only the cost of fuel, there are no tax consequences for using the exact prices paid at the pump and the vehicle’s fuel consumption figures.
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