Whether you drive a company car, or use your own car on business, you’ll need to account for, or reclaim your fuel costs. What do you need to know?
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For company car drivers
HMRC publishes a table (shown below) of Advisory Fuel Rates (AFRs) which they base on fuel type, engine size and the current cost of fuel. These figures are reviewed every quarter.
If the cost per litre has moved by +/-5%, HMRC will issue revised figures for the next quarter.
AFRs are advisory!
HMRC cannot compel employers to stick to AFRs but most do. Current AFRs are given in the table below. Check if your employer will reimburse at the AFR rate or at an alternative.
Record your business mileage
Record the mileage of each business journey in your diary or schedule, together with the reason for the trip, multiply that by the agreed rate and add it to your expenses claim. Also keep track of your total mileage.
Why should you read this?
- You have a company car, but reclaim the cost of your business travel
- You use your own car on company business
- You’re self-employed and want to claim for your business travel
If AFR rates are used then there are no tax or NIC implications. If a higher figure is used then you may be liable for tax on the amount above the AFR. If lower, you can get relief for any expenses that have not been reimbursed.
For company car drivers who receive ‘free’ fuel there can of course be no reclaim.
But some companies provide all fuel and ask the employee to repay their private mileage. So deduct your overall business mileage from your total monthly mileage to give your private mileage. Multiply that by your agreed rate for deductions from your salary – so no free fuel tax is incurred.
If private mileage is repaid in full, then there are no tax or NIC implications for employer or employee.
Using your own car
For drivers using their own cars, the process of claiming business mileage is the same as the company car driver.
Mileage has to relate directly to your work
But the reimbursement rates are much higher. These Authorised Mileage Allowance Payments (AMAPs) , intended to cover all standing (insurance, MOT and road tax) and running costs, are currently 45 pence per mile (ppm) for the first 10,000 miles in the tax year and 25ppm thereafter for any car. You can’t make your employer reimburse you at the full AMAPs rate, but you can reclaim the difference on your tax return
There is an additional 5ppm allowance for an accompanying employee as a passenger.
Have a choice. The simplest route is to use the AMAP rates to set your business mileage against your income on your tax return. Or it may be advantageous to put the costs of funding and running the car through your books, with a proportion deducted for your private mileage. The same proportion will apply to capital allowances. There’s no company car tax liability.
What’s business mileage?
HMRC says that only two types of journey count as legitimate business travel.
Either journeys that form part of an employee’s employment duties (for example, visiting clients), or journeys that relate to an employee’s attendance at a temporary workplace. Commuting to a permanent place of work does not count.
- Company car drivers claim using AFR rates
- If you use your own car for business, use the AMAP rates
- If you’re self-employed you can use the AMAP rates to set your business travel against tax
Employers can reclaim VAT on reimbursements made to drivers for business journeys at up to the AFR but they but must retain receipts and associated paperwork in line with current VAT legislation.
HMRC Advisory Fuel Rates (AFRs) for company cars
Remember that these figures are reviewed quarterly and that if the cost of fuel changes by +/-5%, the amount claimed changes. We always publish the latest updates – click here to check.
Authorised mileage allowance payments (AMAPs)
If you use your own car on business, whether your are self-employed or an employee, these are the rates HMRC permits you to reclaim for your business mileage. All cars (irrespective of engine size or type):
- First 10,000 miles – 45ppm
- Over 10,000 miles – 25ppm
- Get advice from a professional adviser such as an accountant, especially if self-employed
- Check your employer’s business mileage travel expenses are in line with the AFR rates
- Start keeping detailed records of your business and total monthly mileage
Fleet Alliance and company car finance
Fleet Alliance is a leading UK fleet management provider offering contract hire, leasing and a complete range of fleet solutions products, from personal contract hire through to small fleet contract hire.
Why are we associated with this factsheet?
Because we’re a market leader in the provision of car finance to the SME market as well as larger corporate fleets.
Fleet 360 is delivered via e-fleet, our cloud-based fleet management and reporting system.
Coupled with our strong people-based customer service ethos, e-fleet provides a complete outsourced fleet management solution.
We currently manage over 10,500 vehicles with a combined value in excess of £200m.
We deliver a complete fleet solution via our market leading Fleet 360 model which provides the best combination of advice, products, competitive pricing and outstanding service.
So whether you’re interested in a personal lease or a contract hire, we can find a competitively priced car for you.
You can look us up at our website where you’ll also find industry news, white papers to help you make more informed decisions and, if you’re interested, our blog which takes a light hearted look at serious fleet issues.
While you’re there, why not try out company car tax calculator.
So if you’re looking for finance or fleet advice, call us on 0845 601 8407.