Advisory Fuel Rates

Advisory fuel rates explained as well as when they are used and the HMRC fuel rates in use from 1 December 2020.

The guide has been updated on 1 December 2020 for changes in the latest legislation.

When Are The Advisory Fuel Rates Used?

The HMRC Advisory Fuels Rates are the amounts set out by HMRC that you need to use when:

  1. Reimbursing employees for private fuel used for business travel in a company car
  2. Setting the rate that employees repay businesses for private fuel use on fuel cards
  3. Calculating VAT on mileage claims

You’ll need to use these HMRC Advisory Fuel Rates regardless of the true cost of the fuel for any of the above.

Advisory Fuel Rates

The applicable rates from 1 December 2020 are:

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

The advisory electricity rate for fully electric cars is 4 pence per mile. Hybrid cars are treated as either petrol or diesel cars for this purpose.

Mileage Allowance Payments vs. Advisory Fuel Rates

Mileage allowance payments are used when a business reimburses an employee when they use their personal vehicle for business travel, and are set at more than the price of fuel per litre to reflect the wear and tear on the car and incidental costs such as:

  • insurance;
  • maintenance;
  • insurance.

Advisory rates relate to just fuel. That’s why they are used when employees have a company car because the company will be picking up the running costs of the car.

Mileage allowance rates

Claiming Back VAT on Fuel

VAT registered businesses are entitled to reclaim VAT on expenses, including fuel. Fuel is vat-able at the standard VAT rate of 20% so it is possible to reclaim VAT using the advisory fuel rates.

How to Claim Back VAT on Mileage Claims

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Anita Forrest
About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of - the UK small business finance blog for the self-employed community. Here she shares simple, straight-forward guides to make self-employment topics like taxes, bookkeeping and banking easy to understand.