Company car drivers hit by drop in business mileage rates

COMPANY car drivers in mid-range cars will not take kindly to this news: the company car business mileage rates are dropping by a penny a mile from 01 June 2013.

The change has been instigated by HMRC’s quarterly review of company car business mileage rates and will remain in place until the end of August.

The drop in the mileage rate affects drivers of petrol and diesel cars with engines between 1401cc to 2000cc; and diesel cars of 1600cc capacity and less.

It will also affect drivers of petrol cars with engines of more than 2.0-litres.

For petrol company cars in the main 1401cc to 2000cc engine band, the business mileage rate drops from 18p per mile to 17p per mile. For diesel company cars, the business mileage rates drop from 15p to 14p. For smaller engined diesel drivers (1600cc and less) the rate drops to 12p.

The business mileage rates are known as Advisory Fuel Rates by HMRC (often shortened to AFR).

The Advisory Fuel Rates are used by company car drivers to claim business mileage in a company car.

Alternatively, if a company supplies a company fuel card to pay for all fuel at point of purchase, the AFRs can be used to deduct private mileage – and therefore sidestep the punitive ‘free fuel’ tax (see Free fuel more expensive).