HMRC launches new road fees for all petrol, diesel and electric vehicle owners

HM Revenue and Customs (HMRC) have introduced new advisory fuel rates from June 1 with petrol, diesel and electric car owners all affected. Advisory Fuel Rates are used by companies to fairly reimburse employees for business travel while behind the wheel of company cars.

AFR fees are also used by employees to repay the company for any private use of a company car. It allows firms to have a standard fuel fee for a set period, avoiding confusion of almost daily price adjustments at fuel stations. AFR rates are regularly updated every three months with the latest fees coming into effect on June 1, 2025.

As of today, HMRC officials have confirmed some slight adjustments with petrol and diesel owners most affected.

Motorists with a petrol vehicle above 1401cc and over will enjoy a 1p cut as a result of reductions in national fuel prices.

It means petrol owners with engines between 1401cc and 2000cc will pay 14p per mile compared to the previous 15p rate.

Those with engines above 2,000cc will be charged 22p per mile by their employers compared to 23p per litre between March and May.

Diesel engines up to 1600cc will also have fuel fees cut by 1p per mile with the rates back at the pre-March rate. It will see prices fall from 12p per litre to 11p per litre in a boost for cash-strapped motorists.

However, HMRC has confirmed that all other petrol and diesel engine sizes will remain unchanged.

Meanwhile, the electric mileage rate remains unchanged at 7p per mile from June 1.

According to HMRC, the latest petrol and diesel prices are taken from the Department for Energy Security and Net Zero (DESNZ).

Meanwhile, they confirm that the LPG UK average is from the AA website. The advisory electric rate for fully electric cars is calculated using electrical price data from various sources.

These include the Department for Energy Security and Net Zero, the Office for National Statistics (ONS) and car electrical consumption rates from the Department for Transport (DfT).

The RAC explained: “AFRs are in place to help companies stick to the rules surrounding tax and Class 1A National Insurance costs when it comes to fuel for company cars.

“When reimbursing employees for fuel costs from a business trip, so long as a company pays for the expense at a rate no higher than the AFR for the car in question, they are not required by HMRC to pay Class 1A National Insurance and it is also accepted that there is no taxable profit gained.”