HMRC update as these vehicle owners to see higher costs in coming days | Personal Finance | Finance

Motorists are being told to prepare for a price surge by March as travelling in the UK with petrol and diesel company cars is set to become more costly. This is due to new Advisory Fuel Rates updated by HMRC.

The increased costs will be implemented from March 1, changing the price of company car rates based on specific engine sizes.

Diesel cars with engines up to 1,600cc will see a rise of one penny from 11p to 12p per mile.

Petrol vehicles with engine sizes between 1,401-2,000cc will undergo a similar 1p increase from 14p to 15p per mile.

However, diesel vehicles with engines between 1,601cc and 2,000cc will not experience this hike, with fuel rates for these company cars remaining at 13p per mile.

Likewise, diesel vehicles with engines over 2,000cc are anticipated to maintain their rate at 17p per mile.

The advisory electricity rate for electric vehicles in company fleets will remain unchanged at 7p per mile.

All other types of petrol vehicles and those using liquefied petroleum gas, or LPG, are also expected to stay at their current rates.

Advisory Fuel Rates are determined by the government to assist businesses in calculating tax and reimbursement on company cars.

HMRC bases the Advisory Fuel Rate on current diesel prices at 146.1 pence per litre and petrol prices at 138.7 pence per litre.

The advisory electricity rate is calculated using an electrical efficiency of 3.57 miles per kilowatt hour, factoring in the cost of domestic electricity at 25.24 pence per kilowatt hour.

These rates apply when a company needs to reimburse an employee for business travel in a company car or when an employee has to repay the company for personal use of a company car.

The classification varies based on engine size, as HMRC takes into account the fuel efficiency of different engines.

In their latest update, HMRC clarified that hybrid cars will still be categorised as either petrol or diesel for Advisory Fuel Rate purposes, depending on their specific design.