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Do your employees use their company-owned vehicles outside of work? If so, it’s crucial that you stay informed about car fuel benefits.

Understanding the 2024/25 rates, knowing how to accurately report to HMRC, and being aware of the associated tax and National Insurance implications can help you manage these benefits effectively.

Whether you’re a business owner, HR manager, or senior accountant, staying up to date on these aspects ensures compliance and optimises the management of your company’s vehicle expenses.

Let’s get started.

Car fuel benefit: what is it?

When you provide a company car and cover the cost of fuel for your employees’ personal use, they are subject to a company car fuel benefit tax. HMRC regards this fuel as ‘free fuel’, and it is taxed accordingly.

This means that although the fuel is paid for by your company, your employees will still incur costs due to the associated tax. If your company does not subsidise this benefit, your employees will be taxed based on the value of the free fuel provided.

Understanding and managing this benefit is crucial to ensure compliance and to inform your employees of their tax obligations.

What are the company cars and vans rates for 2024/25? 

In the Autumn Statement 2023, the government announced that the van benefit charge, as well as the car and van fuel benefit charges, will remain unchanged at the 2023/24 levels for the 2024/25 tax year. The rates will be as follows: 

Charge  Rate 
Van benefit charge  £3,960 
Van fuel benefit charge  £757 
Car fuel benefit charge multiplier  £27,800 

HMRC’s advisory fuel rates for company cars in 2024 

Let’s take a look at the fuel rates provided by HMRC for company cars, effective from 1 March 2024: 

For petrol cars

Engine size  Petrol — rate per mile  LPG — rate per mile 
Up to 1400cc  13 pence  11 pence 
Between 1401cc and 2000cc  15 pence  13 pence 
Over 2000cc  24 pence  21 pence 

For diesel cars  

Engine size  Diesel — rate per mile 
Up to 1600cc  12 pence 
Between 1601cc and 2000cc  14 pence 
Over 2000cc  19 pence 

For electric cars

Electric — rate per mile 
9 pence 

For hybrid cars  

Hybrid — rate per mile 
When it comes to advisory fuel rates, hybrid cars are treated as either petrol or diesel cars. 

How can you process and report car fuel benefit to HMRC? 

You have two ways to report car fuel benefit to HMRC:

  1. P11D form: submit this form at the end of the tax year, as with other benefits. 
  2. Payroll: process the car fuel benefit through payroll, deducting tax in real time. 

Note that starting in 2026, payrolling benefits will become mandatory. If you’re currently using P11D forms, it’s a good time to switch to payroll processing. 

Tax and Class 1A NICs on car fuel benefit

Your employees 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 have a lower percentage, while those with higher emissions have a higher percentage, ranging from 2% to 37%.

Your organisation 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 employees (currently at a rate of 13.8%). 

How are the fuel rates calculated? 

Fuel rates are calculated using a straightforward process set by HMRC, so you don’t need to worry about the details.

However, here’s a brief explanation:

  1. Mean MPG calculation: HMRC begins 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.
  2. 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.
  3. 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.
  4. Rate calculation: using the adjusted MPG and current fuel prices, HMRC calculates the advisory fuel rates.  

By following these steps, HMRC ensures that the advisory fuel rates are accurate and reflective of real driving conditions and fuel costs. 

Let’s take a look at the calculation breakdown: 


Engine size (cc)  Mean MPG  Fuel price (per litre)  Fuel price (per gallon)  Rate per mile  Advisory fuel rate 
Up to 1400  49.5  140.6 pence  639.0 pence  12.9 pence  13 pence 
Between 1401 and 2000  42.1  140.6 pence  639.0 pence  15.2 pence  15 pence 
Over 2000  26.7  140.6 pence  639.0 pence  24.0 pence  24 pence 


Engine size (cc)  Mean MPG  Fuel price (per litre)  Fuel price (per gallon)  Rate per mile  Advisory fuel rate 
Up to 1600  56.7  149.4 pence  679.0 pence  12.0 pence  12 pence 
Between 1601 and 2000  48.0  149.4 pence  679.0 pence  14.2 pence  14 pence 
Over 2000  36.3  149.4 pence  679.0 pence  18.7 pence  19 pence 


Engine size (cc)  Mean MPG  Fuel price (per litre)  Fuel price (per gallon)  Rate per mile  Advisory fuel rate 
Up to 1400  39.6  96.5 pence  438.7 pence  11.1 pence  11 pence 
Between 1401 and 2000  33.7  96.5 pence  438.7 pence  13 pence  13 pence 
Over 2000  21.3  96.5 pence  438.7 pence  20.6 pence  21 pence 


How often do HMRC update the advisory fuel rates?

HMRC revise the advisory fuel rates quarterly to reflect changes in fuel costs. Theses revisions happen on the following dates: 

  • 1 March 
  • 1 June 
  • 1 September 
  • 1 December 

Do you have to use HMRC’s advisory fuel rates? 

The advisory fuel rates set by HMRC serve as a guideline and are not mandatory. If for instance, a company car consumes more fuel than the advisory rate covers, both employees and employers can be reimbursed at a higher rate. This is possible if the employer can prove the car’s higher fuel consumption. Similarly, lower fuel rates can be used for more economical cars. 

Want to streamline your mileage allowance process?

Book a demo with Capture Expense today and discover how our platform simplifies tracking, calculating, and reimbursing mileage while ensuring compliance with HMRC’s advisory fuel rates.

If you are also on the hunt for payroll software that can efficiently manage all your employees’ taxable benefits, then look no further. JPS is at your service.