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Our lovely team of Fuellers often gets asked how the government’s Advisory Fuel Rates (AFRs) work with fuel cards. With new AFRs effective from 1st June 2025, we explore the topic and tackle some key questions. But first, let’s start with the basics: What on earth is an AFR?
What is an AFR?
Advisory Fuel Rates are the rates that HMRC advises should be used for employees driving a company car. The rates should be used to reimburse employees for business travel in their company cars or for employees to repay the cost of fuel used for private travel. They are a set of pence-per-mile figures based on the fuel type and the vehicle’s engine size.
How often do AFRs change?
HMRC reviews rates quarterly – 1 March, 1 June, 1 September and 1 December.
How are AFRs calculated?
A host of information and calculations go into the mix to come up with the AFR – including mean miles per gallon (MPG) from car manufacturers’ information, petrol and diesel prices from the Department for Energy Security and Net Zero (DESNZ) and the LPG (UK average) from the Automobile Association website. It gets even more complex for EVs, using information from the Department for Energy Security and Net Zero, Office for National Statistics (ONS), and car electrical consumption rates from the Department for Transport (DfT).
Are the rates changing?
As of 1st June 2025, AFRs for diesel vehicles with an engine size of 1,601-2,000cc and more than 2,000cc remain the same (13ppm and 17ppm, respectively). There is a 1p decrease for a company car with an engine size of up to 1,600cc – now 11ppm.
The AFR for petrol vehicles with an engine size of 1,401- 2,000cc has been cut from 15ppm to 14ppm. For petrol vehicles with an engine more than 2,000cc, the rate is now 22ppm (cut from 23ppm). The AFR for a petrol-powered car up to 1,400cc stays the same at 12ppm.
The advisory electricity rate (AER) stays at 7ppm. Rates for LPG vehicles have not changed, staying at 11ppm for vehicles up to 1,400cc, 13ppm for 1,401-2,000cc, and 21ppm for engines greater than 2,000cc.
While this was correct at the time of writing, AFRs change quarterly, so please make sure you visit the government website for the latest rates.
Do the rates apply to all cars that are used for business?
AFRs are specifically set for use with company cars and apply whether the car is owned or leased by the company. They are not to be used for private vehicles used for business.
For employees using their own vehicles for business travel, different rates apply (e.g., 45p per mile for the first 10,000 miles). AFRs are not used in this context. For advice on reimbursing other business expenses, including travel in employee-owned vehicles, visit the HMRC website.
Are the AFR rates set in stone?
In some circumstances, employers can set their own rates. However, to reimburse more than the AFR, employers have to prove why. If unable to, the costs are likely to incur Fuel Benefit Tax and Class 1A National Insurance charges.
If any employer wants to pay less than the AFR, the car must be shown to be more cost-effective or fuel-efficient on a pence per mile basis. In short, yes, employers can pay a rate different from the AFR, but evidence is key.
How do fuel cards help simplify the process?
Fuel cards provide a convenient way for businesses to manage business-related fuel expenses. In addition to providing access to cheaper fuel, the fuel cost is charged directly to the company. This simplifies things by eliminating the need for employees to pay for fuel and submit a claim. Admin time is significantly reduced – as well as providing simple HMRC-compliant invoicing, there is no need to spend time reimbursing employees based on AFRs – the company can simply track, manage and pay fuel costs directly.
What about private mileage?
AFRS are used to calculate how much an employee is required to repay the company for personal travel in a company car. In the case of company fuel cards, company expense policies may allow employees to pay for fuel using the fuel card and then record the amount of private and business mileage they do. In this instance, employers can apply the relevant AFR to the employee’s private miles and request that the employee pay at the going rate. It’s important to note that if the employee does not fully reimburse the cost of private fuel, it may result in a fuel benefit charge.