HM Revenue and Customs (HMRC) have published their quarterly advisory fuel rates which are effective from 1 December 2020 and apply to company car users.  Employers can use the previous rates for up to one month after the new rate becomes effective.

The rates are reviewed for 1 March, 1 June, 1 September, and 1 December.

The rates can be used in two ways:

  1. To reimburse company car users for business mileage
  2. To set a mileage rate for employees who need to reimburse the employer for the cost of fuel for private travel and thus avoid a fuel scale benefit.

Providing an employer does not pay more than the advisory fuel rates for business miles according to the engine size of the vehicle and type of fuel, then there is no taxable profit or Class 1A NIC liability.

Where an employer chooses to pay more than the advisory fuel rates, the excess is treated as taxable profit and there is a Class 1 NIC liability.

However, if the employer pays mileage rates than are below the advisory rates, then the employee can claim tax relief on the difference between what was actually paid and HMRC’s advisory rates.

Fully Electric Cars

The advisory electricity rate for fully electric cars is 4 pence per mile.

Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates.  See below.

Advisory Fuel Rates 1 December 2020

Engine sizePetrol – rate per mileLPG – rate per mile
1400cc or less10 pence7 pence
1401cc to 2000cc11 pence8 pence
Over 2000cc17 pence12 pence
Engine sizeDiesel – rate per mile
1600cc or less8 pence
1601cc to 2000cc10 pence
Over 2000cc12 pence

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