If you use your own car for work purposes, you can claim a tax free mileage allowance. The Advisory Electricity Rate (AER) will be available alongside current AFRs for petrol, diesel and LPG cars when the next AFRs are published. HMRC will introduce an advisory fuel rate (AFR) for pure electric cars from September 1 at 4 pence per mile (ppl). But perhaps it’s more informative to look at your actual average mileage if you are considering an electric car. This confusion has arisen largely because HMRC’s advisory fuel rates, or approved mileage allowance payments, only cover petrol and diesel cars. Your employer uses HMRC's AMAP rate of 45p per mile. When the underlying unrounded figure ends in a number greater than 0.5 (for example 0.513) it is rounded up to the nearest whole penny. Claiming mileage for a hybrid . HMRC Fuel Rates. Didn't find your answer? If the mileage rate you pay is no higher than the advisory fuel rates for the engine size and fuel type of the company car, there will be no taxable profit and no Class 1A National Insurance to pay. We use cookies to collect information about how you use GOV.UK. They will cost less to run, are more environmentally friendly and they are significantly more tax efficient. Some confusion has been reported over how businesses should calculate mileage expenses rates for electric and hybrid company cars. Usually where a car allowance is paid the employer will pay a lower rate on the basis that they are providing you with additional pay to provide your own car and all you need reimbursing for is the fuel for business mileage. It will take only 2 minutes to fill in. HMRC's guidance does not address what is accepted to be making good in full where the car is a hybrid car. Some confusion has been reported over how businesses should calculate mileage expenses rates for electric and hybrid company cars. You can use the previous rates for up to 1 month from the date the new rates apply. It applies to cars that are privately owned and to company cars, provided that the charging facility is located “at or near the workplace” and is available for all employees to use. With effect from 1 September 2018, the official mileage rate for electric company cars is 4 pence per mile. Author. If your employer reimburses you at a lower mileage rate than the HMRC advisory rate, or does not reimburse your mileage, you will be able to claim Mileage Allowance Relief (MAR). The ‘rates per mile’ calculated in these tables are shown rounded to one decimal place, but the final advisory fuel rates are rounded to the nearest whole penny. As this is a multi … To be eligible for mileage allowance under the AMAP rules, you must be using your own personal vehicle; e.g. Mileage Allowance Relief (MAR) - electric and hybrid cars are treated in the same way as petrol and diesel cars. …but now pure electric cars pay no company car tax. The British tax service HMRC has specified mileage reimbursement rates for electric cars. From 1st September 2018, employees driving on business in a pure electric company car can claim 4p per mile. Here’s more on how to claim MAR. Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates. Advisory fuel rates from 1 March 2020 The Advisory Fuel Rate is based on the engine size and fuel type of your car. Can I still claim back mileage expenses for my electric or hybrid car? HMRC fuel advisory Suggests . The advisory fuel rates from 1 December 2020 have been added and information on how the advisory fuel rates are calculated has been updated. This follows campaigning from fleet representatives and … HMRC has announced the introduction of an advisory fuel rate for 100% electric cars from September 1 at 4p per mile. Tax; Recently released draft HMRC guidance sheds more light on … Electric cars - personal mileage claims. Hybrid cars – those that are powered by both electric and internal combustion engines – are treated as petrol/diesel cars under the HMRC rules. If an employee does 100 business miles in this car, and charges the car at home, the company will pay them 4p per mile, which is the Advisory Electric … HMRC outlines mileage reimbursement rates for electric cars. 2020 Kia Soul EV – 243 miles. This does not include travelling to and from your work, unless it’s a temporary place of work. © 2018 RJP LLP is registered in England & Wales. The same 45p per mile for first 10k then 25p a mile thereafter applies. With regard to fuel costs, if a business pays an employee a mileage allowance, whereby VAT is recoverable on the fuel element of that mileage allowance, HMRC have published a 4p per mile rate for electric cars in their advisory fuel rate table. These Advisory Fuel Rates are also used to calculate the fuel portion of a mileage claim. View more . Otherwise, HMRC will treat any excess as taxable and the employer will be required to pay Class 1 National Insurance. A - Use the relevant petrol or diesel figure. The rate for subsequent miles is 25p per mile. HMRC calls this rate the Advisory Electricity Rate (AER). However, if an employer pays a higher rate than the recommended HMRC mileage rates for electric cars (AER), they must be able to prove that the electricity cost per mile is higher. Some confusion has been reported over how businesses should calculate mileage expenses rates for electric and hybrid company cars. The advisory electricity rate for fully electric cars is unchanged at 4p per mile. The changes to the taxation of employee benefits from 6 April 2017 which largely removed the income tax and employer NIC advantages of optional remuneration arrangements such as salary sacrifice (see here ) do not apply to ultra-low emissions vehicles . Overall, this means that although buying an electric car can be expensive in the first place, in the long-term they can be a cheaper alternative to petrol or diesel cars. AFRs for electric cars. Check how the new Brexit rules affect you. Search AccountingWEB. What are the tax free rules for a Covid Christmas? This is important when claiming VAT on mileage expenses. Electricity is not a fuel for car fuel benefit purposes. As long as the mileage rate used to pay employees for business mileage is less than or equal to the appropriate AFR then there is no taxable profit or Class 1A National Insurance to be paid. And when employees drive their company car on private journeys, they will use the AER to repay the cost of electricity at 4p per mile. With electric vehicles becoming a more practical choice for company fleets, the lack of clarity over electric car mileage allowances has made life difficult for employers and employees. Name. Because of this, hybrid drivers have to work out their mileage claim using the Advisory Fuel Rate tables for petrol/diesel . 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. Instead, you’ll have to treat any excess as taxable profit and as earnings for Class 1 National Insurance purposes. Don’t include personal or financial information like your National Insurance number or credit card details. Search AccountingWEB . According to Car magazine, roughly one in two new cars registered each year is part of a fleet purchase. The client wanted to pay a mileage rate for business mileage and could not find the rate to use in the HMRC literature. Brexit and the impact on VAT. Advisory fuel rates from 1 December 2020 These are that the business travel cost is more than the recommended rate and the electric cars used are more efficient. Whilst the grant can’t be used for used vehicles, there are grants available for other types of vehicle, such as vans and motorcycles. Generally speaking electric vehicles need a bigger up front investment and the mileage rate is to cover capital cost, running cost & depreciation. Registered company number: OC323740. There are currently no specific rates for hybrid cars. If you’re working out business mileage based on a personal electric vehicle, or if you're claiming for your home office, the full AMAP allowance can be claimed. Why? £1m capital allowances extension available for another 12 months. HMRC fuel advisory Suggests . We use this information to make the website work as well as possible and improve government services. The sale of electric and hybrid cars have seen a massive boom over the last couple of years. You drive two cars for the same job, driving 3000 miles with Car One and 6000 miles with Car Two. Don’t forget the deadline for sending in your self assessment tax return and making tax payments. Information has also been updated on how rates are calculated where the mean miles per gallon were produced using the New European Driving Cycle or the Worldwide Harmonized Light Vehicle Test Procedure. This article explains the tax implications of using vehicles at work, whether they are petrol or diesel cars or electric/hybrid. HMRC have announced that, from 1 September 2018, a new Advisory Fuel Rate (AFR) of 4 pence per mile will apply for fully electric company cars. For example, if an employee travels 8,000 business miles in their fully electric company car, they can receive £320 in mileage for the tax year free of tax or NIC. Hybrid cars – those that are powered by both electric and internal combustion engines – are treated as petrol/diesel cars under the HMRC rules. Earlier this year, the Government revealed electric vehicles will be exempt from company car tax in the 2020/21 tax year. Although HMRC agreed to adopt the AER for fully electric vehicles it didn’t accept any changes for hybrids. Because of this, hybrid drivers have to work out their mileage claim using the Advisory Fuel Rate tables for … HMRC outlines mileage reimbursement rates for electric cars By Natalie Middleton / 5 years ago / Latest News / No Comments HMRC’s decision not to recognise electricity as a fuel has been cited by some organisations as a reason for them not to introduce 100% electric vehicles to their fleets. As a milestone decision, this is the first opportunity for company cars to be taxed at 0% as a benefit in kind (BIK), helping businesses make the transition to zero emission vehicles and a potentially emission-free future. If your cars are more fuel efficient, or if the cost of business travel is higher than the guideline rates, you can use your own rates to reflect your situation. Q - Which car mileage allowance rates should apply to hybrids? This confusion has arisen largely because HMRC’s advisory fuel rates, or approved mileage allowance payments, only cover petrol and diesel cars. Recently released draft HMRC guidance sheds more light on the tax treatment when an employee charges their own electric car at work, but the treatment of business mileage payments relating to electric cars continues to leave many in the dark . We’ll send you a link to a feedback form. You will not need to use the advisory rates where you can show that employees cover the full cost of private fuel by repaying at a lower mileage rate. With effect from 1 September 2018, the official mileage rate for electric company cars is 4 pence per mile. Car and van mileage allowances . The advisory electricity rate for fully electric cars is 4 pence per mile. HMRC’s decision not to recognise electricity as a fuel has been cited by some organisations as a reason for them not to introduce 100% electric vehicles to their fleets. Don’t worry we won’t send you spam or share your email address with anyone. Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates. In fact, HMRC explicitly state that their company car Advisory Fuel Rates (AFR) can’t be used for electric vehicles, (although curiously, they can be used for hybrid vehicles; even if the driver mainly uses the electric motor rather than the petrol engine!). That’s why the ACFO, the fleet decision-maker’s organisation, has been putting pressure on HMRC to provide companies with a new electric car mileage rate. HMRC have announced that from 1 September 2018 a new Advisory Fuel Rate (AFR) of 4 pence per mile will apply for fully electric company cars. Advertisement . Hybrid or range-extender company cars will have the appropriate HMRC rates applied depending on whether they’re diesel or petrol. Here are five electric cars that have the best mileage, according to Kelley Blue Book. Claiming mileage is relatively straightforward through an expenses claim. The Miles Consultancy (TMC) has produced a guide showing how businesses can calculate mileage repayment rates for electric and hybrid company cars instead of using HMRC’s advisory fuel rates or approved mileage allowance payments, which only cover petrol and diesel cars Well, AMAP is not fuel dependent. Electricity is not a fuel for car fuel benefit purposes. The advisory electricity rate for fully electric cars is calculated using published consumption rates, adjusted to reflect real driving conditions and the average cost of electricity. There will be no fuel benefit charge if you correctly record all private travel mileage and use the correct rate (or higher), to work out how much your employees must repay you for fuel used for private travel. Sun Motors compares official range numbers to the latest real-world mileage tests on a selection of electric cars. This is 45pp for the first 10,000 miles and 25pp thereafter. Earlier this year, the Government revealed electric vehicles will be exempt from company car tax in the 2020/21 tax year. A company car is seen as a perk, or a benefit-in-kind, by HMRC and taxed accordingly as if it were extra income. However, with electric cars, how do you go about reimbursing employees? Tax: rates per business mile. If you pay rates that are higher than the advisory rates but cannot show the fuel cost per mile is higher, there will be no fuel benefit charge if the mileage payments are only for business travel. From 2020, drivers with diesel company cars will also have to pay a 4% tax surcharge unless their car meets new RDE2 standards. HMRC don't have a different rate for electric vehicles. HMRC Fuel Rates. Conclusion: The Most Cost-Effective Cars for Your Business The advisory fuel rates for petrol, LPG and diesel cars are shown in these tables. A) Taxes applicable to all ULEV users 1. HMRC’s position is that as the car cannot move without a battery it is integral to the car. It just covers the cost of owning and running a vehicle, including VED tax, MOTs and repairs. Latest Any Answers . Fuel Duty When it comes to company cars, the tax payable (classed as a benefit in kind or BIK) is more complicated. Emma Rawson. Due to HMRC not recognising electricity as a fuel, organisations have pulled the plug on introducing 100% electric vehicles to their fleets. However, if an employer wants to use them, then they only apply where the employer: reimburses employees for business travel in their company cars; or; requires employees to repay the cost of fuel used for private travel in those company cars. The advisory electricity rate for fully electric cars is unchanged at 4p per mile. The new rate means that HMRC will now accept that payments to employees of up to 4 pence per mile for business travel in a fully electric company car will not result in a taxable benefit in kind. Where the: For liquefied petroleum gas (LPG), the MPG used is 20% lower than for petrol due to lower volumetric energy density. HMRC obliged and issued a new electric car business allowance called the advisory electric rate (AER). Although HMRC agreed to adopt the AER for fully electric vehicles it didn’t accept any changes for hybrids. These rates only apply to employees using a company car. The advisory electricity rate for fully electric cars is unchanged at 4p per mile. And this is explained in more detail below. The amount of the BIK applying to a company car depends on the CO2 emissions it releases. The level of Mileage Allowance Relief a driver can claim for tax purposes cannot exceed 45p per business mile (25ppm if the mileage exceeds 10,000) less any amount already paid tax free to the driver. 7th Dec 2020. TaxCalc. to reimburse the employee for business mileage, or; for the employee to reimburse their employer for the cost of fuel which has been used for private mileage. If you are paid a car allowance from your employer, or by your company, then you can claim expenses based on one of the following methods: Claim the relevant advisory fuel rate or the approved mileage allowance payments based on the petrol or diesel engine ; Claim the first 20 to 30 miles of each trip using the cost of the electricity then pay the full advisory fuel rate for the remaining trip The new rate means that HMRC will now accept that payments to employees of up to 4 pence per mile for business travel in a fully electric company car will not result in a taxable benefit in kind. As long as the mileage rate used to pay employees for business mileage is less than or equal to the appropriate AFR then there is no taxable profit or Class 1A National Insurance to be paid. To help us improve GOV.UK, we’d like to know more about your visit today. Sage Accountants. Consequently, many people decide to use their own car and claim a mileage allowance instead. I know it says that electricity is not a fuel but it is considered so when paying for dual fuel gas and electric. What the new VAT filing changes mean. If you pay the exact amount, do not tell HMRC at all, whether on forms P11D, or otherwise. Rates per mile which end in 0.5 are rounded down to the nearest whole penny for the advisory fuel rate when the underlying unrounded figure ends in a number less than 0.5 (for example 0.487). All content is available under the Open Government Licence v3.0, except where otherwise stated, Rates and allowances: travel - mileage and fuel allowances, How to work out the benefit of a company car (480: Chapter 12), Company car benefit – the appropriate percentage (480: Appendix 2), HM Revenue and Customs: car derived vans and combi vans, Coronavirus (COVID-19): guidance and support, Transparency and freedom of information releases, reimburse employees for business travel in their company cars, need employees to repay the cost of fuel used for private travel. a car, van, bicycle or motorbike. Planning for Brexit: Services provided by businesses for consumers in the EU. I do approximately 8,000 miles on business and about the same for personal use. If you’re interested in learning about electric car business allowances, we created a complete guide to show you how to decide an electric car mileage allowance for your business. You must not use these rates in any other circumstances. Categories. Electricity is not a fuel for car fuel benefit purposes. Personally owned cars If an employee uses their own electric car for business purposes, Approved Mileage Allowance Payments (AMAPs) apply in the same way as for petrol or diesel cars: Any reimbursement by the employer for business mileage is tax and … When using a privately owned electric vehicle at work, it is possible to claim for mileage too. Hybrid or range-extender company cars will have the appropriate HMRC rates applied depending on whether they’re diesel or petrol. Authorised Mileage Allowance Payments (AMAPs), and, if the employer pays less than the published rates, may claim tax relief under Mileage Allowance Relief (MAR). Email (will not be shown) Notify me when people reply Login / Register. The all-electric Kia Soul has hurtled into the best mileage competition for 2020. The more emissions and the higher the car’s value when new, the higher the taxable BIK and hence the tax liability. This tax year (from 6 April 2020) we have seen the introduction of tax exemptions on electric and low emission vehicles which is increasing the popularity of electric company cars. You can change your cookie settings at any time. Registered office address: 2 AC Court, High Street, Thames Ditton, Surrey KT7 0SR. Just sign-up to our monthly newsletter: Bookkeeping services for Surrey businesses. Chances are, you already know the petrol and diesel IRS reimbursement rates like the back of your hand. Approved Mileage Allowance Payment (AMAPs) - electric and hybrid cars are treated in the same way as petrol and diesel cars. So if an employee travels 8,000 miles for business purposes in their own fully electric car they could claim 8,000 x 45p = £3,600. Company cars and using the advisory fuel rate. Check price list, mileage, reviews & images of battery cars at CarDekho They are also known as “HMRC company car mileage rates”. 15th Jan 2021. Advisory Fuel Rates (AFR’s) should be used to re-imburse business use company car mileage. HMRC have however announced that, from 1 September 2018, a new AFR of 4 pence per mile will apply for fully electric company cars. Will I be able to claim 45p per mile as I do currently for my Diesel car or will there be a new allowance set as there has been for Company Car mileage? As it is your car the own car rate rules apply. The New Brexit Deal: What Accountants Should Know. HMRC specifies that the 45 pence per mile (or the 25 pence per mile) is meant to cover expenses beyond fuel, such as fixed expenses (insurance, road tax, depreciation) and the variable (wear and tear) costs of running your car. Q - Which car mileage allowance rates should apply to hybrids? Due to HMRC not recognising electricity as a fuel, organisations have pulled the plug on introducing 100% electric vehicles to their fleets. Advisory fuel rates from 1 December 2020 What Is the Mileage Rate for Electric Cars? You should also keep in mind that the HMRC rates don’t consider whether a driver mainly uses the electric motor or petrol engine. Claim capital allowances so your business pays less tax when you buy assets - equipment, fixtures, business cars, plant and machinery, annual investment allowance, first year allowances The latest petrol and diesel prices are taken from the Department for Business, Energy and Industrial Strategy and the LPG (UK average) is from the Automobile Association website. Electric cars need mileage rate support. Some companies have facilities for tax-free charging of electric car batteries at work and this facility can be provided as well as the reimbursement of business mileage using an AFR. By Natalie Middleton / 5 years ago / Latest News / No Comments. For example, if an employee travels 8,000 business miles in their fully electric company car, they can receive £320 in mileage for the tax year free of tax or NIC A company has an electric company car. A - Use the relevant petrol or diesel figure. Posted Fri, 07 Feb 2020 20:34:07 GMT by JFKNIGHT29. Top tax tips in the palm of your hand. Related articles. For cars, the maximum grant available is £3,500, which is deducted by the dealer or manufacturer at the point of sale. Some people buy these cars as an eco-friendly alternative to the large petrol engines and soon to be phased out diesel engines.. Their increasing popularity saw HMRC introduce mileage reimbursement rates for hybrid and electric vehicles in 2018. Check the full list of vehicles eligible for the plug-in grant. The maximum relief for NIC is always 45p per business mile. Industry insights . HMRC has announced the introduction of an advisory fuel rate for 100% electric cars from September 1 at 4p per mile. Advisory Fuel Rates (AFR’s) should be used to re-imburse business use company car mileage. As a milestone decision, this is the first opportunity for company cars to be taxed at 0% as a benefit in kind (BIK), helping businesses make the transition to zero emission vehicles and a potentially emission-free future. Business News. Here is a worked example of the tax payable on a company car to illustrate how the calculation is achieved: Car tax band: 28% - based on level of emissions and cost, Taxable benefit in kind: 28% x 20,000 = £5,600, BIK tax payable by a basic rate taxpayer = £1,120, BIK tax payable by a 40% rate taxpayer = 2,240. Your employee travels 12,000 business miles in their car - the approved amount for the year would be £5,000 (10,000 x 45p plus 2,000 x 25p). VAT Domestic Reverse Charge: How will it impact the construction industry? HMRC publish advisory fuel rates, the rate for electric cars is 4ppm. Mileage rates for electric and hybrid cars. The AMAP rate is higher than the AFR rate because it covers fuel costs as well as running costs such as MOT and repairs. Example - tyres & insurance still need to be paid for. If you have an electric car as a company car, the advisory electricity rate is 4p per mile. HMRC publish advisory fuel rates, the rate for electric cars is 4ppm. HMRC sets mileage reimbursement rates for electric cars. Talk to us and we can help you prepare your tax return and advise you on the best options for deferred payments. The advisory fuel rates are worked out from the fuel prices in these tables. Alternatively, HMRC allows employers to use their own mileage rate if certain conditions are met. Mileage allowance guide; Mileage allowance for self-employed . Electric cars need mileage rate support. Its driving range for a full charge has been boosted to 243 from 111 in the 2019 model. HMRC recommends plug-in hybrid and hybrid car drivers use AFRs according to the amount of fuel the engine uses. 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