If your business uses company cars, yours and your employees’ fuel costs could be increasing due to recent changes made by HMRC.
Advisory fuel rates were increased for specific engine sizes from 1 March 2025. Read on to find out how advisory fuel rates work and by how much your business fuel costs could rise.
What are advisory fuel rates?
Advisory fuel rates help businesses that use company cars to manage reimbursement of fuel payments. They’re set by the government and based on the latest fuel prices.
A business can apply advisory fuel rates in two situations:
- if they need to reimburse an employee for the cost of business travel in a company car
- if an employee needs to reimburse the business for the cost of private travel in a company car
Businesses can use the advisory fuel rate to stick to their Class 1A National Insurance obligations.
When you reimburse an employee for fuel costs, if you pay it at the advisory fuel rate or below, you won’t need to pay Class 1A National Insurance. In this situation, it’s also considered that there’s no taxable profit to pay.
HMRC advisory fuel rates changes March 2025
The latest advisory fuel rates started on 1 March 2025. The cost per mile has increased for:
- petrol cars with an engine size of up to 1,400cc
- diesel cars with an engine size of between 1,601 and 2,000cc
Advisory fuel rates for petrol cars
| Engine size (cc) | Fuel rate before 1 March | Fuel rate after 1 March |
| Up to 1,400 | 12p per mile | 12p per mile |
| 1,401 to 2,000 | 14p per mile | 15p per mile |
| Over 2,000 | 23p per mile | 23p per mile |
Advisory fuel rates for diesel cars
| Engine size (cc) | Fuel rate before 1 March | Fuel rate after 1 March |
| Up to 1,600 | 11p per mile | 12p per mile |
| 1,601 to 2,000 | 13p per mile | 13p per mile |
| Over 2,000 | 17p per mile | 17p per mile |
The latest advisory fuel rates are based on a petrol price of 138.7p per litre and a diesel price of 146.1p per litre.
Advisory fuel rates for electric cars
The advisory fuel rate for electric vehicles from 1 March 2025 remains at 7p per mile.
The latest rate for electric vehicles is based on the ‘domestic electricity cost per kilowatt-hour’ of 25.24p. This figure is published annually by the Department for Energy Security and Net Zero.
Could advisory fuel rates increase again this year?
Advisory fuel rates are reviewed and set four times a year. The next rate review is due on 1 June 2025.
There’ll be two further reviews this year on 1 September 2025 and 1 December 2025.
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- Tesco place maximum limit on fuel pumps
- Parking tickets – no more ‘five-minute fines’ for business drivers
- UK launches digital driving licences
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