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HMRC Cuts Electric Vehicle Advisory Rates Amid Petrol and Diesel Increases

Published by Prerana
Posted Date: June 1, 2024 , Modified Date: May 31, 2024

HM Revenue and Customs (HMRC) has announced adjustments to the advisory fuel rates effective from 1 June 2024. While petrol and diesel rates have seen an uptick, the advisory rate for fully electric vehicles has been reduced, reflecting ongoing changes in the automotive and energy sectors.

What Are the New Rates?

From 1 June 2024, the advisory rates for petrol and diesel engines will increase by 1p to 2p per mile, while the rate for liquid petroleum gas (LPG) remains unchanged. The new rates are as follows:

Engine Size

Previous Petrol Amount (per mile)

Current Petrol Amount (per mile)

Previous LPG Amount (per mile)

Current LPG Amount (per mile)

Previous Diesel Amount (per mile)

Current Diesel Amount (per mile)

1400cc or less

13p

14p

11p

11p

12p

13p

1401cc to 2000cc

15p

16p

13p

13p

14p

15p

Over 2000cc

24p

26p

21p

21p

19p

20p

The advisory electricity rate for fully electric vehicles, however, has been reduced from 9p to 8p per mile, indicating a slight decrease in the cost of electric vehicle (EV) operation.

How Do These Changes Affect Company Car Users?

Here is a breakdown of how the changes can potentially affect company car users:

  • Reimbursement for Business Travel 

The primary application of these rates is for reimbursing employees for business travel in their company cars. With the increase in rates for petrol and diesel, employees driving these vehicles can now claim a slightly higher reimbursement, which could help offset the rising fuel costs. 

Conversely, the reduction in the electric vehicle rate might reflect decreasing electricity costs or efficiency gains in electric vehicle technology, although it also means slightly lower reimbursement for those driving electric company cars.

  • Repayment for Private Travel 

Employees who use their company cars for private travel are required to repay the cost of fuel. The updated rates mean that those using petrol or diesel cars will repay a higher amount per mile, aligning their contributions more closely with current fuel prices.

For electric vehicle users, the reduced rate could lower their repayment obligations, which may serve as an additional incentive to switch to electric vehicles.

Conclusion

HMRC’s quarterly review of advisory fuel rates ensures that reimbursements and repayments remain aligned with current fuel costs, providing a fair system for both employers and employees. The latest adjustments highlight the ongoing transition within the automotive sector.

The increased rates for petrol and diesel reflect higher fuel costs, while the reduced rate for electric vehicles suggests an evolving landscape in EV efficiency and electricity pricing. As these rates continue to be reviewed quarterly, businesses and employees alike will need to stay informed to manage their travel expenses effectively.

Prerana
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