It doesn’t matter how big your company is or how many employees you have, if you provide company-owned vehicles for personal use, you must stay informed about car fuel benefits.
We will give you everything you need to know from what the car fuel benefit is, to the 2024/25 rates and how to report car fuel benefit to HMRC.
Fasten your seatbelts and let’s get started.
First things first, what is a car fuel benefit?
To put is simply, the car fuel benefit is applicable to UK taxpayers who use their company car for personal use and don’t pay for the fuel themselves.
It’s also worth noting that normal commuting is classed as personal use for company car fuel benefit purposes.
What are the company cars and vans rates for 2024/25?
The government announced that it will maintain the van benefit charge as well as the car and van fuel benefit charges at the current level for 2024/25.
| Charge | Rate |
| Van benefit charge | £3,960 |
| Van fuel benefit charge | £757 |
| Car fuel benefit charge multiplier | £27,800 |
What are HMRC’s advisory fuel rates for company cars in 2024?
These are the fuel rates set by HMRC for company cars, starting from 1 March 2024:
Diesel
| Engine size | Diesel — rate per mile |
| Up to 1600cc | 12p |
| Between 1601cc and 2000cc | 14p |
| Over 2000cc | 19p |
Petrol
| Engine size | Petrol — rate per mile | LPG — rate per mile |
| Up to 1400cc | 13p | 11p |
| Between 1401cc and 2000cc | 15p | 13p |
| Over 2000cc | 24p | 21p |
Electric
| Electric — rate per mile |
| 9p |
Hybrid
For advisory fuel rates, hybrid cars are considered either petrol or diesel vehicles.
Do HMRC regularly update their fuel rates?
HMRC updates the advisory fuel rates quarterly to account for fluctuations in fuel costs. These updates occur on the following dates:
- 1 March
- 1 June
- 1 September
- 1 December
How to report car fuel benefits to HMRC
Your reporting options
1. P11D Form:
Submit this form at the end of the tax year, along with other benefits.
2. Payroll:
Process the car fuel benefit through payroll, deducting tax in real time.
Important update
From 2026, payrolling benefits will become mandatory.
This means that if you are currently using P11D forms you should consider switching to payroll processing now to stay ahead of the change.
Tax and Class 1A National Insurance Contributions on car fuel benefits
Your people must pay tax on any car fuel benefit they receive. The taxable value is calculated using HMRC’s appropriate percentage, which considers the car’s CO2 emissions. Cars with lower emissions are assigned a lower percentage, whereas those with higher emissions receive a higher percentage, varying from 2% to 37%.
Your company also has contributions to make. You’ll need to pay Class 1A National Insurance Contributions on the value of the car fuel benefit provided to your people (currently at a rate of 13.8%).
What method is used to calculate the fuel rates?
Here’s a brief explanation of how HMRC calculates their fuel rates:
- Mean MPG calculation: HMRC starts by determining the mean miles per gallon (MPG) based on manufacturers’ data. This figure is adjusted to reflect the distribution of specific models sold to businesses.
- Applied MPG adjustment: the mean MPG is then reduced by 15% to account for real-world driving conditions, recognising that actual fuel efficiency is often lower.
- Fuel price data: HMRC sources the petrol prices from the Department for Business, Energy, and Industrial Strategy, while LPG prices are taken from the Automobile Association website.
- Rate calculation: using the adjusted MPG and current fuel prices, HMRC calculates the advisory fuel rates.
By doing all this, HMRC ensures that the advisory fuel rates are accurate and reflective of real driving conditions and fuel costs. Here is the calculation breakdown:
Diesel
| Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Rate per mile | Advisory fuel rate |
| Up to 1600 | 56.7 | 149.4p | 679.0p | 12.0p | 12p |
| Between 1601 and 2000 | 48.0 | 149.4p | 679.0p | 14.2p | 14p |
| Over 2000 | 36.3 | 149.4p | 679.0p | 18.7p | 19p |
Petrol
| Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Rate per mile | Advisory fuel rate |
| Up to 1400 | 49.5 | 140.6p | 639.0p | 12.9p | 13p |
| Between 1401 and 2000 | 42.1 | 140.6p | 639.0p | 15.2p | 15p |
| Over 2000 | 26.7 | 140.6p | 639.0p | 24.0p | 24p |
LPG
| Engine size (cc) | Mean MPG | Fuel price (per litre) | Fuel price (per gallon) | Rate per mile | Advisory fuel rate |
| Up to 1400 | 39.6 | 96.5p | 438.7p | 11.1p | 11p |
| Between 1401 and 2000 | 33.7 | 96.5p | 438.7p | 13p | 13p |
| Over 2000 | 21.3 | 96.5p | 438.7p | 20.6p | 21p |
FAQs
Is it worth taking a company car?
Whether an employee should use a company car hinges on how much they drive and spend on fuel. If they rack up a lot of miles and their fuel costs exceed the car’s fuel benefit, it’s a good deal. However, if their fuel expenses are low, they could actually end up paying more with the benefit.
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