Article Posted: 19 September 2012
Advisory rates are falling – but only for LPG.
If you have a company car, you probably have to buy your own fuel for business mileage and make an expense claim. ‘Free fuel’ is now something of a rarity – the latest HMRC statistics (for 2010/11) show only about a quarter of company car drivers had fuel paid for by their employer, down from over a third in 2004/05. The proportion in 2012/13 is probably smaller still because of the harsh tax treatment of free fuel (see box below).
When free fuel is not provided, HMRC sets advisory fuel rates for employer payments in respect of business mileage. These are reviewed quarterly and were kept unchanged from 1 September 2012, except for LPG vehicles, where there was a 1p-2p per mile cut. The mileage rates are now:
| Engine Size |
Petrol |
LPG |
Diesel |
| 1,400cc or less |
15p |
10p |
12p |
| 1,401cc – 1,600cc |
18p |
12p |
12p |
| 1,600cc – 2,000cc |
18p |
12p |
15p |
| Over 2,000cc |
26p |
17p |
18p |
|
For ‘free’, read ‘expensive’ Barbara has a BMW 320d company car with CO2 emissions of 120g/km. If her employer gave her ‘free fuel’, the taxable benefit in 2012/13 would be £3,636, i.e. £1,454 extra tax for a higher-rate taxpayer like Barbara. £1,454 would buy her over 1,000 litres of diesel at current prices – enough to cover about 13,500 miles at the BMW’s average 61.4mpg. Because Barbara’s private mileage is only 8,000 miles a year, she is better off without ‘free fuel’. She also gains from her business mileage allowance. Barbara receives 15p a mile fuel allowance for business mileage, but her BMW is sufficiently economical that her actual cost of fuel is only about 10.5p a mile.
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