Advisory Fuel Rates 2021

If company cars are a part of your work or business then you need to know about advisory fuel rates. Advisory fuel rates are a tax charged by the government on all company cars and if you drive one then you might have to pay it. To help you get up to speed, we’ve explained all the key details you need to know about advisory fuel rates below. 

What are advisory fuel rates for vehicles? 

Advisory Fuel Rates (AFRs) are the rates set by the UK government to help businesses in reimbursing or being reimbursed for fuel costs of company cars. 

This covers petrol, diesel, electric hybrid (these either pay the petrol or diesel rate), and electric cars. 

There are two instances where advisory fuel rates apply to company cars: 

  1. To reimburse employees for any business travel in a company car that they’ve paid for.
  2. Allowing employees to repay the cost of the fuel used for personal trips in company cars.

While petrol, diesel, and hybrid cars have been required to pay advisory fuel rates for many years, advisory fuel rates were only introduced for electric cars on 1 September 2018.  

Why have advisory fuel rates? 

AFRs are in place to help companies stick to the rules surrounding tax and Class 1A National Insurance costs when it comes to fuel for company cars.

When reimbursing employees for fuel costs from a business trip, so long as a company pays for the expense at a rate no higher than the AFR for the car in question, they are not required by HMRC to pay Class 1A National Insurance and it is also accepted that there is no taxable profit gained.

As a company, you have the right to use your own rate where a lower rate is required. For instance, if your company cars are proven to be more fuel efficient than the AFR suggests, you can choose to reimburse employees for an amount less than AFRs suggest.

It is also possible to repay higher than the AFR. However, in this case you must demonstrate that the cost per mile was in fact higher than the guideline rate.

When an employee has to repay fuel costs for personal trips made in a company car, the price paid must be at the AFR or higher in order for HMRC to accept that there is no fuel benefit charge.

The AFR is not binding when you can prove that the amount paid by the employee covers the amount of personal fuel expense in full, even where it is less than the guideline rate.

Current advisory fuel rates

Advisory fuel rates are based on both the engine type and size of company cars. They are set by the UK government four times each year – on the first day of March, June, September, and December. 

You can see the current government advisory fuel rates in the table below:

Current rates for petrol cars and other vehicles

Engine size Petrol – rate per mile
1400cc or less £0.10
1401cc to 2000cc £0.12
Over 2000cc £0.18

Current rates for diesel cars and other vehicles

Engine size Diesel – rate per mile
1600cc or less £0.09
1601cc to 2000cc £0.11
Over 2000cc £0.12

Current rates for LPG cars and other vehicles

Engine size LPG – rate per mile
1400cc or less £0.07
1401cc to 2000cc £0.08
Over 2000cc £0.12

LPG stands for liquefied petroleum gas – also known as autogas.

Current rates for fully electric cars and other vehicles

Engine size Electric – rate per mile
All £0.04

 

All the above figures are the rates from 1 March 2021.

It’s important to know that the advisory fuel rates for electric cars only apply to cars that are fully electric, so not hybrids.

An explanation of how advisory fuel rates are calculated

Two yellow fuel pumps and two green fuel pumps might be used to refuel a company car at HMRC advisory fuel rates

Credit: Pixabay

Like many government levies, the UK government provides an explanation of how advisory fuel rates are calculated. How does it do it? Quite simply, by using fuel prices. 

It makes this calculation by using the following six fuel price data inputs: 

  • Engine size (cc)
  • Mean miles per gallon
  • Applied per gallon
  • Fuel price (per litre)
  • Fuel price (per gallon)
  • Pence per mile

The tables below show you how advisory fuel rates are calculated by the UK government for the different fuels and the engine sizes of vehicles.

Engine size petrol cars and other vehicles

Engine size (cc) Mean MPG Applied MPG Fuel price (per litre) Fuel price (per gallon) Rate per mile Advisory fuel rate
Up 1400 57 52.7 120.5 pence 547.9 pence 10.4 pence 10 pence
1401 to 2000 48.2 44.6 120.5 pence 547.9 pence 12.3 pence 12 pence
Over 2000 32.7 30.3 120.5 pence 547.9 pence 18.1 pence 18 pence

Engine size diesel cars and other vehicles

Engine size (cc) Mean MPG Applied MPG Fuel price (per litre) Fuel price (per gallon) Rate per mile Advisory fuel rate
Up 1600 71.3 65.9 125.0 pence 568.3 pence 8.6 pence 9 pence
1601 to 2000 57.9 53.4 125.0 pence 568.3 pence 10.6 pence 11 pence
Over 2000 49.8 45.8 125.0 pence 568.3 pence 12.4 pence 12 pence

Engine size LPG cars and other vehicles

Engine size (cc) Mean MPG Applied MPG Fuel price (per litre) Fuel price (per gallon) Rate per mile Advisory fuel rate
Up 1400 45.6 42.2 64.2 pence 291.9 pence 6.9 pence 7 pence
1401 to 2000 38.5 35.7 64.2 pence 291.9 pence 8.2 pence 8 pence
Over 2000 26.2 24.2 64.2 pence 291.9 pence 12.0 pence 12 pence

 

Engine size electric cars and other vehicles 

The UK government doesn’t publish a table for electric cars and other vehicles. 

Instead, official documentation explains that “the advisory electricity rate for fully electric cars is calculated using published consumption rates, adjusted to reflect real driving conditions and the average cost of electricity”.

A list of the historical advisory fuel rates

Advisory fuel rates aren’t static – they are updated four times every year, with the rates being amended in March, June, September, and December.

To give you an idea of how much the advisory fuel rates change every quarter, we’ve included the previous rates from March 2020 to February 2021.

UK Government Fuel Rates From 1 December 2020 To 28 February 2021

Engine size Petrol Diesel LPG Electric
1400cc or lower £0.10 N/A £0.07 £0.04
1600cc or lower N/A £0.08 N/A £0.04
1401cc – 2000cc £0.11 N/A £0.08 £0.04
1601cc – 2000cc N/A £0.10 N/A £0.04
More than 2000cc £0.17 £0.12 £0.12 £0.04

UK Government Fuel Rates From 1 September 2020 To 30 November 2020

Engine size Petrol Diesel LPG Electric
1400cc or lower £0.10 N/A £0.07 £0.04
1600cc or lower N/A £0.08 N/A £0.04
1401cc – 2000cc £0.12 N/A £0.08 £0.04
1601cc – 2000cc N/A £0.10 N/A £0.04
More than 2000cc £0.17 £0.12 £0.12 £0.04

UK Government Fuel Rates From 1 June 2020 To 31 August 2020

Engine size Petrol Diesel LPG Electric
1400cc or lower £0.10 N/A £0.06 £0.04
1600cc or lower N/A £0.08 N/A £0.04
1401cc – 2000cc £0.12 N/A £0.08 £0.04
1601cc – 2000cc N/A £0.09 N/A £0.04
More than 2000cc £0.17 £0.12 £0.11 £0.04

UK Government Fuel Rates From 1 March 2020 To 31 May 2020

Engine size Petrol Diesel LPG Electric
1400cc or lower £0.12 N/A £0.08 £0.04
1600cc or lower N/A £0.08 N/A £0.04
1401cc – 2000cc £0.14 N/A £0.10 £0.04
1601cc – 2000cc N/A £0.11 N/A £0.04
More than 2000cc £0.20 £0.13 £0.14 £0.04

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Sources and References

More information about advisory fuel rates can be found on the UK government website.