The UK government dropped fresh advisory fuel rates (AFRs) for company cars, and they’re inching up again. Effective March 1, 2025, the new rates reflect a steady climb in fuel costs, marking the fourth consecutive month of price hikes.
Fuel Costs Keep Climbing
If you thought fuel prices might cool down, think again. According to RAC data, petrol and diesel costs have been relentlessly rising, and the latest AFR tweaks capture the impact. Midsize petrol engines (1401cc to 2000cc) and smaller diesels (1600cc or less) see a 1 pence per mile (ppm) increase. Electric car users, however, get no boost—the advisory electric rate (AER) stays locked at 7ppm.
AFRs determine how much employees can claim per mile when using company cars for business travel. These rates are reviewed quarterly and updated based on fuel price movements. Employers can keep the previous rates up to a month after the change, ensuring a smooth transition.
New Rates Breakdown
Here’s how the latest AFRs stack up (previous rates in brackets):
Petrol Cars:
- 1400cc or less: 12ppm (unchanged)
- 1401cc to 2000cc: 15ppm (up from 14p)
- Over 2000cc: 23ppm (unchanged)
LPG Cars:
- 1400cc or less: 11ppm (unchanged)
- 1401cc to 2000cc: 13ppm (unchanged)
- Over 2000cc: 21ppm (unchanged)
Diesel Cars:
- 1600cc or less: 12ppm (up from 11p)
- 1601cc to 2000cc: 13ppm (unchanged)
- Over 2000cc: 17ppm (unchanged)
Electric Vehicles:
- All fully electric cars: 7ppm (unchanged)
The Math Behind the Rates
The government pulls its numbers from data compiled by the Department for Energy Security and Net Zero (DESNZ) and the Office for National Statistics (ONS). Petrol and diesel prices come straight from DESNZ, while LPG figures are courtesy of the Automobile Association. For EVs, the Department for Transport calculates consumption rates using business fleet averages from the past three years.
Hybrid cars? They follow the rates of their respective fuel type—no special treatment here.
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What This Means for Businesses
Rising fuel costs mean higher reimbursements, but they might not be enough to keep up with soaring pump prices. Fleet operators and businesses should revisit expense policies and adjust budgets accordingly.
Meanwhile, as EV adoption grows, calls to increase the AER persist, though regulators have yet to act. If fuel prices keep surging, expect further tweaks in future reviews.
Businesses that rely on company cars must carefully evaluate these new rates. Monitoring fuel prices and adjusting corporate travel policies can minimise unexpected expenses. Given the growing pressure to reduce carbon footprints, companies may also consider fleet electrification as a long-term solution.
Stay Ahead of the Curve
With fuel markets in flux, businesses and employees should stay sharp on upcoming AFR updates. Want to keep mileage reimbursements in check? Keep an eye on fuel trends and government announcements—because these rates aren’t set in stone.
For the latest AFR details, check the official government site or touch base with your company’s HR or finance team to see how these changes might hit your bottom line.
As the transport landscape shifts, companies and individuals must adapt to an evolving fuel economy. Whether that means switching to EVs, negotiating new reimbursement policies, or simply driving smarter, one thing is clear: keeping up with advisory fuel rates is more important than ever.
