Understand what the advisory fuel rates are, when they are used and the applicable HMRC fuel rates for 2021.
Table of contents
1. What are Advisory Fuel Rates?
The HMRC advisory fuels rates are rates per mile to use instead of mileage allowance payments when:
- Reimbursing employees for private fuel used for business travel in a company car
- Setting the rate that employees repay businesses for private fuel use on fuel cards
- 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.
1.1 Mileage Allowance Payments vs. Advisory Fuel Rates
Mileage allowance payments (typically known as the 45p per mile) 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.
2. HMRC Advisory Fuel Rates
The current advisory fuel rates from 1 June 2021 are:
| Engine size | Petrol - amount per mile | LPG - amount per mile |
|---|---|---|
| 1400cc or less | 11p (previously 10p) | 8p (previously 7p) |
| 1401cc to 2000cc | 13p (previously 11p) | 9p (previously 8p) |
| Over 2000cc | 19p (previously 17p) | 14p (previously 12p) |
| Engine size | Diesel - amount per mile |
|---|---|
| 1600cc or less | 9p (previously 8p) |
| 1601cc to 2000cc | 11p (previously 10p) |
| Over 2000cc | 13p (previously 12p) |
The advisory rate for fully electric cars is 4 pence per mile. Hybrid cars are treated as either petrol or diesel cars for this purpose.
3. How to Claiming Back VAT on Fuel
VAT registered businesses are entitled to claim back VAT on expenses, including fuel used for business travel. VAT is charged at the standard rate of 20% and it can be claimed back on fuel using the fuel rates. Find out how to claim in this guide.
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