HMRC gives some drivers some more money


Those of us who drive conventionally-fuelled cars will have noticed that it costs significantly more to fill them up with petrol or diesel than it used to in years gone by. Over the course of this year, we’ve seen increases to as much as £2 a litre in some areas and although the average forecourt prices have abated somewhat, being £1.70 for petrol and £1.86 for diesel at the end of August, they are still much higher than they were in the past.   

The geo-political reasons for this are depressingly obvious, but this doesn’t alter the fact that for many businesses the use of a car or van is essential. As firms strive to recover from the pandemic, getting out to see clients and suppliers face-to-face is important, but sadly two groups are seemingly conspiring to make this difficult.

Firstly, as reported today, the petrol retailers are failing to pass on the actual fall in the price of fuel. This is particularly the case for petrol (diesel prices do reflect the wholesale price more fairly), with the RAC saying that even at 161p, retailers would still be making a generous 10p a litre margin.

Secondly, and perhaps unsurprisingly, the other group that is taking advantage of the rise in fuel prices to increase their ‘profit’ is HMRC.  For those (including the self-employed) who use their own vehicles for business and claim business mileage, the rates allowed by HMRC have not increased since 6th April 2011. At that date, petrol was £1.36 per litre while diesel was £1.42, so clearly these people have been out of pocket for quite some time now. 

However, those who drive company cars have seen rises in the amounts they can claim over that period and HMRC has just published the latest advisory fuel rates for company car users, effective from 1st September 2022. In a display of unparalleled generosity, they have increased rates by between one and two pence per mile

More specifically, there is a 1p per mile increase on petrol vehicles under 2000cc and 2p rise for vehicles over 2000cc. The equivalent diesel vehicle rate goes up 1p for vehicles under 2000cc and 3p for over 2000cc, while LPG rates remain unchanged except for a 1p rise for vehicles over 2000cc. Hybrid cars are treated as either petrol or diesel cars for this purpose. The advisory electricity rate for fully electric cars remains at 5p per mile. That last figure might sound reasonable, but bear in mind that the recent increase in the energy price cap may now make it more expensive to charge some electric vehicles than to fill their petrol equivalents!

The previous rates, effective June 2022, can be used for up to one month from the date the new rates apply. Crucially, the rates only apply in the following circumstances: to reimburse employees for business travel in their company cars; or when it is required that employees repay the cost of fuel used for private travel. These rates cannot be used in any other circumstances. If the rates are used, it is not necessary to apply for a dispensation to cover the payments made. When employees are reimbursed for business travel in their company cars, HMRC will accept there is no taxable profit and no Class 1A national Insurance to pay.  The table below gives the full details:

Advisory fuel rates from 1st September 2022

Engine sizePetrol – amount per mile (previous)LPG – amount per mile (previous)
1400cc or less15p (14p)9p (9p)
1401cc to 2000cc18p (17p)11p (11p)
Over 2000cc27p (25p)17p (16p)
Engine sizeDiesel – amount per mile
Up to 1600cc14p (13p)
1601cc to 2000cc17p (16p)
Over 2000cc22p (19p)

This is all well and good and undoubtedly for company car drivers something is better than nothing. However, the self-employed and those who use their own cars for business purposes have been offered nothing. As in 2011, they can only claim 45p per mile for first 10,000 and 25p per mile after that. This is yet another disincentive for people to go out on their own and start a new business. The ONS records that sharp falls in self-employment during the coronavirus pandemic, from a peak of 5.0 million at the end of 2019 down to 4.2 million in early 2022, were largely driven by people flowing out of self-employment to become employees. IR35 has not helped either. Given that the new Prime Minister is on record as saying she wants “to usher in a small business and self-employed revolution,” we shall watch with interest to see whether her new Business Secretary (one Jacob Rees-Mogg) actually delivers….