The new Advisory Fuel Rates (AFRs) published by HMRC are effective as of Wednesday, March 1 and apply to company car drivers who are claiming back fuel costs from their employer. The new AFRs include a 1 pence per mile (ppm) increase in the advisory electricity rate (AER) used to reimburse drivers of electric company cars. This increase is in line with the rising costs of electricity for businesses, and is intended to better reflect the actual cost of running an electric vehicle. Additionally, the new AFRs also include a smaller increase for drivers of petrol and diesel cars, with the rates for both increasing by 0.4 ppm. These changes are expected to be beneficial to both employers and employees, as they will provide a more accurate reflection of fuel costs and help to ensure that drivers are fairly reimbursed for their expenses.
In the past, many companies would base their reimbursement rate for electric car drivers on their business miles using the yearly figure from the Department for Business, Energy & Industrial Strategy (BEIS), which is a government department responsible for policy around energy, business and industrial strategy, and the electric energy usage of each car model from the Department for Transport (DfT), which is the government department responsible for policy around transport. The BEIS figure would provide the cost per mile of electric vehicle usage, while the DfT figure would provide the amount of energy consumed per mile of travel. Companies would then use this data to calculate the reimbursement rate for electric car drivers.
HMRC has continued to use data from BEIS and DfT and has now added figures from the Office for National Statistics’ quarterly index of domestic electricity, which was formerly included in the Consumer Price Index, when they assess the AER on a quarterly basis. The AER’s rate has increased to between 8 and 9 ppm, while petrol, diesel and LPG AFRs have been lowered beginning on March 1 due to decreasing fuel prices. Petrol company car rates have been decreased as well, with petrol vehicles up to 1,400cc having a rate of 13 ppm, instead of the former 14 ppm. Petrol vehicles from 1,401-2,000cc have seen a reduction of 2 ppm, from 17 to 15 ppm.
The Air Fuel Ratio (AFR) for vehicles with an engine displacement of over 2,000cc has been decreased from 26 parts per million (ppm) to 23 ppm, representing a decrease of 3 ppm. This is the largest amount of reduction in AFR of any engine size, showing that vehicles with larger engines are being given the most significant decrease in their AFR. This is a good time
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