HMRC has released the latest advisory fuel rates, effective from 1st March 2025. While changes are minimal this time around, it’s important to understand what they mean for your business if you reimburse employees for business travel in company cars (in cases where you do not pay for their fuel) or require repayment for private fuel use (if you do pay for all fuel).
What’s changed?
The key updates include:
- A 1p increase for petrol vehicles with engine sizes between 1401cc and 2000cc
- A 1p increase for diesel vehicles up to 1600cc
- No change to other petrol or diesel rates
- The advisory electricity rate for fully electric cars remains at 7p per mile
Who do these rates apply to?
These advisory fuel rates are set by HMRC to simplify the process of reimbursing employees for business travel in company cars. They can also be used when employees reimburse their employer for private use of fuel. If these rates are followed, there is no taxable profit, and no Class 1A National Insurance needs to be paid. However, they cannot be used in any other circumstances.
Advisory fuel rates from 1st March 2025
Fuel type | Engine size | Rate per mile (previous) |
Electric | Advisory rate | 7p (7p) |
Petrol | 1400cc or less | 12p (12p) |
1401cc to 2000cc | 15p (14p) | |
Over 2000cc | 23p (23p) | |
LPG | 1400cc or less | 11p (11p) |
1401cc to 2000cc | 13p (13p) | |
Over 2000cc | 21p (21p) | |
Diesel | Up to 1600cc | 12p (11p) |
1601cc to 2000cc | 13p (13p) | |
Over 2000cc | 17p (17p) |
Hybrid cars continue to be treated as either petrol or diesel for reimbursement purposes.
What this means for your business
If you reimburse employees for business travel in company cars, you’ll need to update your policies to reflect these rates from 1st March. While the changes are relatively small, they could have a cumulative impact on costs, particularly for businesses with large fleets.
Equally, if you require employees to reimburse the cost of private fuel, ensuring your rates are up to date will help you remain compliant with HMRC’s guidance and avoid any unexpected tax implications.
Future rate reviews
HMRC reviews these rates every quarter—on 1st March, 1st June, 1st September, and 1st December. While this quarter’s adjustments were minor, businesses should remain aware of potential future fluctuations, particularly given ongoing fuel price volatility.
Talk to us
If you have any questions about how these rates affect your business, get in touch with our team at Gravita. We can help you ensure your fuel reimbursement policies remain compliant and cost-effective.
The benefits system, of which these rates form a part, can be difficult to understand and HMRC’s PAYE enquiries can unearth errors and lead to large bills for tax, interest and penalties. Gravita offer PAYE audits which can help to remedy any mistakes before such Revenue investigations. If you would like to pursue this, please contact Gravita Tax partner Dion Laycock.
