HMRC cuts fuel rates – here’s what it means for you
June 02, 2025 by Siobhan Doyle
Car changing is a big deal
HMRC’s new fuel rates are here – and whether you drive petrol, diesel, or electric, it could change how much you pay or get back for fuel.
New advisory fuel rates from HM Revenue and Customs (HMRC) are now in place and could impact all drivers of petrol, diesel, and electric cars, especially those using company cars.
Advisory Fuel Rates (AFRs) are guidelines used by businesses to reimburse employees fairly for fuel costs when driving company cars on work trips. They also help employees repay their companies for any private mileage.
These rates are updated every three months to reflect changing fuel prices.
The latest update, now in effect, brings small but notable changes for petrol and diesel car owners:
- Petrol cars: Drivers with engines between 1.4 litre and 2 litres will see their reimbursement rate drop by 1p per mile, down to 14p per mile from 15p. Those with engines larger than 2 litres will pay 22p per mile, a slight decrease from 23p.
- Diesel cars: For engines up to 1.6 litres, the rate falls from 12p to 11p per mile, returning to pre-March levels. Other diesel engine sizes remain unchanged.
- Electric cars: The mileage rate remains steady at 7p per mile.
| Engine size | Petrol (per mile) | Diesel (per mile) |
|---|---|---|
| 1.4 litres or less | 12p | — |
| 1.401 to 1.6 litres | 14p | 11p |
| 1.601 to 2 litres | 14p | 13p |
| Over 2 litres | 22p | 17p |
How are the rates set, and why do they matter?
HMRC bases its fuel rates on data from trusted government sources, including the Department for Energy Security and Net Zero (DESNZ), the Office for National Statistics (ONS), and electric car consumption figures from the Department for Transport (DfT). This ensures the rates reflect real-world fuel and energy costs as accurately as possible.
The RAC says that these Advisory Fuel Rates (AFRs) aren’t just a guideline: they help businesses stay on the right side of tax rules.
If a company reimburses employees at or below the official rate for fuel used during business trips, there’s no extra tax to pay and no Class 1A National Insurance charges. In short: sticking to the rates means no unexpected tax bills for employers or employees.
Car change? Carwow!
Looking for a new set of wheels? With Carwow you can sell your car quickly and for a fair price – as well as find great offers on your next one. Whether you’re looking to buy a car brand new, are after something used or you want to explore car leasing options, Carwow is your one stop shop for new car deals.
Click here to follow us on WhatsApp, where you can keep up-to-date with all the latest news, reviews, advice guides and videos.