Drivers in the UK who use their private vehicles for business journeys could benefit from increased mileage reimbursements, following an update to the Government's advisory fuel rates. The change, which came into effect from 1st June 2024, has been welcomed by consumer champion Martin Lewis, founder of Money Saving Expert, who described it as a 'really important change' for those affected.
The advisory fuel rates, published by HM Revenue & Customs (HMRC), are used by employers to reimburse employees for fuel costs when they use a company car for private mileage, or when an employee uses their own vehicle for business travel. While employers are not legally obliged to use these rates, they are widely adopted as a standard for tax-free reimbursement. The updated figures reflect the ongoing fluctuations in fuel prices across the country.
For petrol cars, the rates have seen increases across various engine sizes. For example, cars with an engine capacity of 1400cc or less will now be reimbursed at 15 pence per mile, up from 14 pence. Vehicles between 1401cc and 2000cc move from 17 pence to 18 pence per mile, while those over 2000cc rise from 25 pence to 27 pence per mile. Similar adjustments have been made for diesel and LPG vehicles, with electric car rates also seeing a slight increase to 9 pence per mile.
Martin Lewis highlighted the significance of this adjustment, particularly for individuals who cover substantial business mileage and have been feeling the pinch of higher petrol and diesel prices. He emphasised that ensuring fair compensation for fuel costs is crucial for many workers, preventing them from being out of pocket when performing their duties.
Employers have the option to adopt these new rates or continue with previous rates if they were already paying higher amounts. The advisory rates are typically reviewed on a quarterly basis by HMRC to ensure they remain reflective of the prevailing market conditions for fuel. This regular review process aims to keep the rates as current and fair as possible for both businesses and employees.
The move is expected to provide some relief to drivers, particularly those in sectors requiring frequent travel, such as sales, care work, and delivery services. It underscores the Government's and HMRC's efforts to adapt financial guidance in response to the dynamic economic landscape, ensuring that tax-efficient reimbursement mechanisms remain relevant.
Source: Money Saving Expert