Did you know that petrol and diesel car owners are being urged to take note of new rules introduced by HM Revenue and Customs (HMRC) that could significantly impact their finances? These changes, which came into effect on December 1, 2024, are part of the year’s final Advisory Fuel Rate (AFR) update.
What Are The New Rules?
The new rules primarily affect company car drivers. HMRC has updated the pence per mile (ppm) rates for reimbursing employees for business travel in company cars or for the cost of fuel employees must repay for private travel.
Here are the key changes, according to Yahoo:
- Petrol Cars:
- Engines up to 1,400cc: Reduced to 12p per mile
- Between 1,401cc and 2,000cc: Reduced to 14p per mile
- Over 2,000cc: Reduced to 23p per mile
- Diesel Cars:
- Engines up to 1,600cc: Reduced to 11p per mile
- Between 1,601cc and 2,000cc: Reduced to 13p per mile
- Over 2,000cc: Reduced to 17p per mile
- LPG Cars:
- Engines up to 1,400cc: Remains at 11p per mile
- Between 1,401cc and 2,000cc: Remains at 13p per mile
- Over 2,000cc: Remains at 21p per mile
- Electric Cars: Remains at 7p per mile
Why Are These Changes Important?
These changes are crucial for both employers and employees. If the mileage rate paid is no higher than the advisory fuel rates for the engine size and fuel type of the company car, there will be no taxable profit and no Class 1A National Insurance to pay.
However, if the rates paid are higher and cannot be justified by higher fuel costs, the excess will be treated as taxable profit and earnings for Class 1 National Insurance purposes.
What Should Car Owners Do?
Car owners should ensure they are aware of these new rates and adjust their reimbursement or repayment practices accordingly. It is also advisable to keep detailed records of all business and private travel mileage to avoid any potential issues with HMRC.
As HMRC introduces new rules for petrol and diesel cars, car owners should take the following steps:
- Review the new Advisory Fuel Rates (AFRs): Check the updated pence per mile rates for your vehicle’s engine size and fuel type. These rates are crucial for reimbursing business travel or repaying the cost of private fuel.
- Update expense records: Ensure that all business and private mileage is accurately recorded to avoid any taxable profit or Class 1A National Insurance charges.
- Consult with employers: If you use a company car, discuss the new rates with your employer to ensure compliance and avoid any unexpected tax liabilities.
- Consider vehicle efficiency: If your vehicle is more fuel-efficient than the guideline rates, you may need to use your own rates to reflect the actual cost of business travel.
- Stay informed: Keep up-to-date with any further changes or updates from HMRC to ensure ongoing compliance.
Stay informed and make sure you’re compliant with these new rules to avoid any unexpected financial penalties. Taking these steps will help you navigate the new rules and manage your vehicle expenses effectively.
Do you have any specific concerns or questions about these changes?
