The new advisory fuel rates (AFR) for company cars can be used immediately, although companies are under no obligation to do so until the beginning of January.

The new fuel figures replace those advisory rates which have been in place since the beginning of July, and generally increase the amount payable per mile for diesel company cars. The latest AFRs are tabled below and are based on engine size.

Advisory Fuel Rates from January 2011

Engine size 1400cc or less: 13p (petrol); 12p (diesel); 9p (LPG)

1401cc to 2000cc: 15p (petrol); 12p (diesel); 10p (LPG)

Over 2000cc: 21p (petrol); 15p (diesel); 15p (LPG)

How to use the AFRs

HMRC's advisory fuel rates can be used to either reimburse fuel expenditure incurred on business mileage in a company car; or the AFRs can be used to reclaim private mileage usage where a company pays for all fuel, thereby avoiding any benefit in kind tax or National Insurance liability on the part of the business.

For hybrid cars, the petrol allowance should be used.

There has been no change, however, in the tax-free Approved Mileage Allowance Payments (AMAPs) which can be used to repay business mileage in a private car. These remain at 40p per mile for the first 10,000 miles; 25p per mile thereafter.

Author Ralph Morton is editor & publisher of Business Car Manager magazine (www.businesscarmanager.co.uk). He was named Business Writer of the Year in the Guild of Motoring Writers Awards and can be contacted at editor@businesscarmanager.co.uk