HMRC Advisory Fuel Rates to See Increases from March 1, 2025: What You Need to Know

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HM Revenue & Customs (HMRC) has announced that the Advisory Fuel Rates (AFRs) for company cars will see slight increases, effective from March 1, 2025.

These adjustments reflect ongoing changes in fuel prices and are important for both employers and employees who are reimbursed for business-related mileage.

In this article, we break down what’s changing and how these updates might affect your travel expenses.

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What are HMRC Advisory Fuel Rates (AFRs)?

HMRC’s Advisory Fuel Rates are set to help businesses calculate the fuel reimbursement for employees using company cars for business purposes. These rates are updated quarterly to keep up with fluctuating fuel prices.

When employers reimburse employees for business miles driven, the rates depend on factors such as the engine size and fuel type.

Companies and employees can use these rates to ensure that no tax liability arises from excessive fuel payments.

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Changes to AFRs Starting March 1, 2025

The upcoming updates will bring small changes in the reimbursement rates for certain vehicles. Here’s a breakdown of the key changes:

1. Petrol Vehicles

   • Engine size between 1401cc and 2000cc: The rate increases by 1p per mile. This will affect mid-sized petrol vehicles.

2. Diesel Vehicles

   • Up to 1600cc: The rate increases by 1p per mile. Diesel vehicles with smaller engines will see a slight increase in the reimbursement rate.

3. Electric Vehicles

   • The rate remains unchanged at 7p per mile for fully electric cars, maintaining the previous standard for low-emission vehicles.

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Why the Increase?

The increase in Advisory Fuel Rates reflects the ongoing adjustments to match current fuel market prices. Petrol and diesel costs have fluctuated over the past few months, and HMRC regularly reviews these rates to ensure they align with the actual cost of fuel.

The aim is to help businesses avoid overpayment or underpayment on fuel reimbursements. These minor adjustments will help employees and employers continue to manage travel expenses more accurately.

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How These Changes Impact Employers and Employees

Employers who reimburse employees for business travel will need to apply the new rates from March 1, 2025. This change will affect both reimbursement policies and the calculation of any potential tax liabilities.

For employees, those who use company cars for business travel will notice a small increase in their fuel reimbursements. This can help offset rising fuel costs, making business travel more affordable.

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Conclusion

The HMRC Advisory Fuel Rates will see modest increases from March 1, 2025, primarily impacting petrol and diesel vehicles with certain engine sizes.

This update ensures that fuel reimbursements remain in line with current fuel prices. Employers and employees alike should ensure they apply the new rates for all business-related travel from the start of March.

By staying updated on these changes, businesses can continue to reimburse employees fairly while ensuring compliance with HMRC guidelines.

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