H M Revenue & Customs (HMRC) has recognised the rising cost of fuel and has updated its advisory fuel rates for company cars.

These new advisory fuel rates (AFR) replace those in force from 01 January to 31 July 2010.

The new advisory fuel rates can be used from 01 June 2010 to reflect the increased cost of fuel. Employers are free to use the new rates immediately or can wait until the start of July for either paying for business mileage fuel or reclaiming the private mileage element for company paid fuel. However, HMRC says employers are under no obligation to do so until July.

The new AFR rates generally see the amount of money paid per mile rise for petrol cars, while only diesel cars with engines above 2000cc benefit from a 2p per mile increase.

Using the new advisory fuel rates

Firms can use the advisory fuel rates to reimburse staff for the fuel used during business mileage. This applies to drivers of company-owned vehicles.

By using the advisory fuel rates, you will not have to pay tax or National Insurance contributions on them. The advisory fuel rates do not apply to business mileage undertaken in private cars – these payments are the Approved Mileage Allowance Payments (AMAPs). These have remained static at 40p per mile for the first 10,000 miles.

However the new AFR rates are 'advisory'. You can use a higher figure without paying tax or National Insurance, but only if you can demonstrate to the taxman that the actual cost was higher.

The advisory fuel rates can also be used for company car drivers to repay the cost of fuel used for private travel if all fuel is paid for by the business – and thereby escape any fuel benefit-in-kind tax.

Provided that all of the private mileage has been properly identified, the taxman will not levy fuel benefit charge tax or demand (Class 1A) National Insurance contributions if you use the advisory fuel rates from the table below.

For hybrid cars, use the petrol figures.

These advisory fuel rates are reviewed twice a year. Any changes are made at the beginning of January and the beginning of July.

Advisory Fuel Rates from July 2010

Engine size
1400cc or less: 12p (petrol); 11p (diesel); 8p (LPG)
1401cc to 2000cc: 15p (petrol); 11p (diesel); 10p (LPG)
Over 2000cc: 21p (petrol); 16p (diesel); 14p (LPG)

These advisory fuel rates replace the rates in use from 01 January 2010. For reference, the former advisory fuel rates were:

Engine size
1400cc or less: 11p (petrol); 11p (diesel); 7p (LPG)
1401cc to 2000cc: 14p (petrol); 11p (diesel); 8p (LPG)
Over 2000cc: 20p (petrol); 14p (diesel); 12p (LPG)

Further information

• If you want to know how HMRC calculated the new rates, then go to: www.hmrc.gov.uk
• If you would like to know more about AMAPs, then go to Approved business mileage rates (AMAPs)