New HMRC fuel rates: what they mean for your business
HMRC has released the latest advisory fuel rates, effective from 1st June 2025. While changes are minimal this quarter, it’s essential for businesses to understand how these rates impact fuel reimbursements and private fuel repayments for company car users.
What’s changed?
The key updates include:
- A 1p decrease for petrol vehicles with engine sizes between 1401cc and 2000cc
- A 1p decrease for petrol vehicles over 2000cc
- A 1p decrease for diesel vehicles up to 1600cc
- No change to other diesel rates
- The advisory electricity rate for fully electric cars remains at 7p per mile
Who do these rates apply to?
These advisory fuel rates are set by HMRC to simplify the process of reimbursing employees for business travel in company cars. They can also be used when employees reimburse their employer for private use of fuel. If these rates are followed, there is no taxable profit, and no Class 1A National Insurance needs to be paid. However, they cannot be used in any other circumstances.
Advisory fuel rates from 1st June 2025
| Fuel type | Engine size | Rate per mile (previous) |
|---|---|---|
| Electric | Advisory rate | 7p (7p) |
| Petrol | 1400cc or less | 12p (12p) |
| 1401cc to 2000cc | 14p (15p) | |
| Over 2000cc | 22p (23p) | |
| LPG | 1400cc or less | 11p (11p) |
| 1401cc to 2000cc | 13p (13p) | |
| Over 2000cc | 21p (21p) | |
| Diesel | Up to 1600cc | 11p (12p) |
| 1601cc to 2000cc | 13p (13p) | |
| Over 2000cc | 17p (17p) |
Hybrid cars continue to be treated as either petrol or diesel for reimbursement purposes.
What this means for your business
If you reimburse employees for business travel in company cars, you’ll need to update your policies to reflect these rates from 1st June. While the changes are relatively small, they could have a cumulative impact on costs, particularly for businesses with large fleets. Fortunately the reduction in some of the rates, albeit small, is good news for businesses and their employees.
Equally, if you require employees to reimburse the cost of private fuel, ensuring your rates are up to date will help you remain compliant with HMRC’s guidance and avoid any unexpected tax implications.
Future rate reviews
HMRC reviews these rates every quarter, on 1st March, 1st June, 1st September, and 1st December. While this quarter’s adjustments were minor, businesses should remain aware of potential future fluctuations, particularly given ongoing fuel price volatility.
If you have any questions about how these rates affect your business, get in touch with our team at Gravita. We can help you ensure your fuel reimbursement policies remain compliant and cost-effective.
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