Changes to Advisory Fuel Rates from 01 September 2023
The Advisory Fuel Rates (AFRs) have been amended from 01 September 2023. These vary depending on the fuel type and the cc (cubic capacity) of the car. Among the various changes, increasingly, when you look at the AFRs you must factor in the Advisory Electricity Rate as well.
In this article, we want to point you to the following important points:
- When can they be used?
- What is ‘advisory’?
- When are they effective?
- The rates themselves
Using the Rates
Importantly, the rates can be used in two circumstances only, both relating to mileage in company cars (the rates for travel in private cars is via the Approved Mileage Allowance Payments (AMAPs)):
- The rate of reimbursement to employees for business travel, or
- The rate used to calculate amounts employees should repay when they are required to make good the cost of any private travel
They are directly-related to fuel prices, unlike the AMAPs which consider factors in addition to the cost of fuel. Advisory simply means HMRC will accept there is no Income Tax or Class 1 National Insurance liability due if the rate of reimbursement (or repayment calculation) is at or below the rates they publish.
Where the rates of reimbursement (or repayment) are greater, there is an Income Tax and Class 1 National Insurance liability, unless you can justify the fuel cost per mile is higher. Remember, we are looking at only the cost of fuel, not any other factor. So, maybe you are based in an area with higher fuel costs than the national average. This would be a justifying reason. Similarly, if you are based in an area with lower fuel costs or the car fleet is more fuel-efficient, these are other reasons where you can pay / request reimbursement at rates other (lower) than those advised.
The new rates are effective from the dates they apply, i.e. 01 September 2023 in this instance. However, there is always short notice of the change, so HMRC say that the old rates can be used for one month from this date, i.e. up to and including 30 September 2023 for applicable reimbursement and repayment calculations.
The rates from 01 September 2023 are shown in the table below with those for the previous quarter to 31 August 2023 in brackets with * indicating where they have changed. Note that electricity is not regarded as a fuel for Income Tax and National Insurance Contributions purposes, e.g. car fuel benefit, and only applies when the car is fully electrically-powered, not a hybrid: