Muras Matters: Company Cars Changes to Advisory Fuel Rates – Update

This Bulletin is aimed at company car drivers (and their employers) who are not provided with fuel for private mileage

Subsequent to Muras Matters dated 21 November 2022 HM Revenue and Customs (HMRC) updated their advisory fuel rates for company cars with effect from 1 December 2022 to reflect the slight changes in fuel prices. The rates have decreased by 1p for all petrol engine sizes and increased by 1p for LPG vehicles compared with the September 2022 rates. The rates are intended to give guidance to employers about what is an acceptable fuel allowance to reimburse employees for use of fuel, without creating a tax or NIC problem, when on business in their company car.

There is no issue if a business has continued to pay mileage rates at the previous rate as they can be used for up to 1 month from the date any new rates apply. Business should however ensure that the new rates as set out below are used from now on or by 1 January 2023 at the latest.


Where an employer reimburses fuel to an employee using their company car on business, HMRC accepts there is no taxable or NICable benefit as long as the rate paid per mile is no higher than the relevant advisory rate. If, however, the actual cost of the fuel used is in excess of the advisory rate a higher allowance can be paid as long as the employer has detailed records to justify the higher payment.

Where an employer pays for all fuel for a company car but requires an employee to reimburse any private travel, HMRC accepts there is no taxable fuel benefit if the reimbursement is at the appropriate advisory rate, as long as the engine size is 3 litres or less. In exceptional cases, where the engine size is greater than this and the actual cost of fuel is in excess of the advisory rates (and hence an insufficient amount has been reimbursed by the employee), HMRC may argue a higher repayment rate should apply.

It is important to note that, under both circumstances, detailed mileage records should be maintained to substantiate any mileage claim or repayment.

HMRC also has an Advisory Electricity Rate for fully electric cars, although it should be noted that electricity is not deemed a fuel for car fuel benefit purposes.

Rates and date of change

HMRC review the rates every quarter as follows – on 1 March, 1 June, 1 September and 1 December.

With effect from 1 December the revised advisory rates are as follows:

Engine size Petrol/hybrid LPG
1400cc or less 14p 10p
1401cc to 2000cc 17p 12p
Over 2000cc 26p 18p
Engine size Diesel
1600cc or less 14p
1601cc to 2000cc 17p
Over 2000cc 22p
  Fully electric  
All vehicles 8p  

Along with the announcement that the advisory fuel rate for fully electric cars will increase from 5p per mile to 8p per mile with effect from 1 December 2022, HMRC also confirmed that this electric rate will now be reviewed quarterly in line with the advisory fuel rates.

If you would like further information regarding the application of the advisory rates please contact our Tax Director, Jenny Marks.

To see our other news items please visit our Muras Baker Jones – Blog.