Business tax – guidance

Advisory Fuel Rates: when you can use them

Using Advisory Fuel Rates (AFR) to work out mileage costs if you're an employer and provide company cars.

These rates only apply to employees using a company car.

Current rates

Current rates start from 1 March 2015.

When you can use the rates

The rates only apply when you either:

  • reimburse employees for business travel in their company cars
  • require employees to repay the cost of fuel used for private travel

You must not use these rates in any other circumstances. If you use them correctly you will not need to apply for a dispensation to cover the payments you make.

Reimburse employees for business travel in their company cars

If you pay a rate per mile for business travel no higher than the AFR, for the particular engine size and fuel type, HM Revenue and Customs (HMRC) will accept there is no taxable profit and no Class 1A National Insurance to pay.

You can use your own rates which better reflect your circumstances if, for example, your cars are more fuel efficient, or if the cost of business travel is higher than the guideline rates.

If you pay rates that are higher than the advisory rates and can’t demonstrate the fuel cost per mile is higher, there is no fuel benefit charge if the mileage payments are solely for miles of business travel. Instead, you will have to treat any excess as taxable profit and as earnings for Class 1 National Insurance purposes.

Require employees to repay the cost of fuel used for private travel

If you have correctly recorded all miles of private travel and used the correct rate (or anything higher) to work out the cost of fuel used for private travel that the employee must repay to you, HMRC will accept there is no fuel benefit charge.

The advisory rates will not be binding where you can demonstrate that employees cover the full cost of private fuel by repaying at a lower rate per mile.

How rates are calculated

Rates are calculated based on fuel prices and adjusted miles per gallon figures.

Previous rates

Previous rates are available to check from 1 December 2009.