HMRC has revealed a major change for thousands of drivers across the UK.

New fuel rates for company cars will be introduced across the country from June 1.

The newly announced fuel rates for company cars cover electric, diesel, hybrid, petrol and LPG vehicles.

Car expert Darren Miller, from BigWantsYourCar.com explained exactly what the changes may mean for you.

Advisory Fuel Rates

"Advisory Fuel Rates play an important role in managing the costs associated with company car use. These rates, reviewed quarterly by HMRC, provide a standardised framework for reimbursing employees for business travel or calculating repayments for private fuel use.

“By aligning with these rates, employers can ensure compliance with tax regulations while also effectively managing company car expenses."

Advisory Fuel Rates Effective from June 1

"Coupled with the introduction of an advisory electric rate for fully electric cars, the updated Advisory Fuel Rates effective from June 1 mark a significant development in fuel reimbursement practices.

“Petrol cars, varying in engine sizes, will now be subject to rates ranging from 14p to 26p per mile, while LPG cars will incur rates between 11p and 21p per mile. Diesel cars, categorised by engine size, will have rates ranging from 13p to 20p per mile.

"While hybrid vehicles offer a blend of fuel efficiency and environmental benefits, their reimbursement still falls under the same umbrella as petrol and diesel cars. Employers and employees driving hybrid cars must adhere to the applicable petrol or diesel advisory rates based on the vehicle's fuel type and engine size.

“This makes sure cars are consistent and compliant with tax regulations while still accommodating the growing popularity of hybrid technology in corporate fleets."

Transition to Electric Vehicles

“Fully electric cars will now be reimbursed at a rate of 8p per mile, a 2p cut from December 2023, which prompts concerns from drivers that the current Advisory Electric Rate (AER) policy fails to cover all drivers, leaving many out-of-pocket adequately. It is clear that the AER needs significant revisions to ensure fair compensation for everyone affected.

“Employers and employees should adapt to these changes and incorporate electric rates into their reimbursement policies to encourage the use of eco-friendly transportation solutions."