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Increase in advisory fuel rates and approved mileage only ‘scratches the surface’


The spring budget at last recognised the need to amend the rate at which drivers are compensated for fuel used for both company cars and for business usage of private cars.


Simon Hartley Manager,


Business Services


Company car drivers will see the amount of cash they can claim for fuel increase by an average of 2p per mile (pm) after Her Majesty’s Revenue and Customs (HMRC) published new advisory fuel rates (AFRs). HMRC has also announced that AFRs will now be reviewed on a quarterly basis, starting from June, but has withdrawn its commitment to make interim changes if fuel prices vary by 5% or more.


Ultimately, by increasing the rates that businesses use to repay drivers for fuel used on business mileage, HMRC has bowed under pressure from commercial fleet organisations in light of the extraordinary and ongoing increases to fuel prices.


In fact the new increased rates were not due to come into force until 1 July 2011 but HMRC have agreed by “concession” that it can be used with effect from 1 June 2011.


The approved mileage rate has also increased from 40p per mile to 45p per mile for the first 10,000 business miles travelled. But it is worth noting that the 40p per mile rate has been unaltered since 2002 when according to the AA, in January 2002 the UK average for a litre of diesel was just 75.4p per litre – it is now almost double that at around £1.40.


So, looking at the numbers, the majority of commentators would argue that HMRC have actually only scratched the surface with these increases because the new rates do not even begin to compare with the actual increase in costs faced by an individual running a car and using it on their employer’s business.


But taking a big picture view, the UK has some very stringent targets for reducing its carbon footprint over the next decade or so, and with this in mind it would seem apparent that the Government is tempting businesses to think green, rather than subsidising inefficient travelling further.


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