Changes to diesel advisory fuel rates

Listed Under: Blog



For the quarter that commenced 1 September 2016 HMRC announced changes to the advisory fuel rates for some diesel cars; there was a 1p per mile increase for diesel car with an engine size over 1600cc.  Advisory fuel rates can be used to calculate the fuel element of business mileage, on which VAT can be reclaimed (assuming the business is VAT registered).


An employee can use their own vehicle for business mileage and claim an allowance (without incurring further tax implications) up to HMRC’s approved rates of 45p per mile for the first 10,000 miles in the tax year, and 25p thereafter.


HMRC determine that an element of the mileage allowance relates solely to fuel.  This element is equivalent to HMRC’s advisory fuel rates, which can be found here .  The advisory fuel rates vary depending on the engine size and fuel type of the employee’s vehicle, and tend to change every few months to reflect current fuel prices.


Say an employee travels 1,000 business miles in his 1.5L Diesel Ford Focus.  The advisory fuel rate for this vehicle is currently 9p per mile.  So to work out the VAT multiply 1,000 miles by £0.09 (to give £90.00) and then divide by 6 giving a VAT amount to reclaim of £15.00.


You will need to show HMRC on request VAT receipts that have enough VAT on them to cover the claim, so ensure that each employee attaches sufficient VAT receipts to each mileage claim.