HMRC to publish advisory fuel rate for 100% electric cars

HMRC will introduce an advisory fuel rate (AFR) for pure electric cars from September 1 at 4 pence per mile (ppl).

It is a partial victory for fleet representative body ACFO, which has been campaigning for AFRs for both pure electric cars and plug-in hybrids.

The new rate, called the Advisory Electricity Rate (AER), has been set at 4p per mile and will be published alongside AFRs for petrol, diesel and LPG (liquefied petroleum gas) cars based on engine size.

Plug-in hybrid and hybrid cars will continue to be treated as either petrol or diesel models for mileage reimbursement purposes.

AFRs apply where employers reimburse employees for business travel in their company cars, or require employees to repay the cost of fuel used for private travel. They are deemed to be tax and National Insurance-free. AFRs are reviewed quarterly and similarly, the new AER will be kept under review.

In notifying ACFO of the introduction of the new rate, HMRC said:

“HMRC will accept that if employers pay up to the Advisory Electricity Rate of 4p per mile when reimbursing their employees for business travel in a fully electric company car there is no profit – there will be no taxable profit and no Class 1 National Insurance to pay.

“On a similar basis to Advisory Fuel Rates, employers can use their own rate which better reflects their circumstances if, for example, their cars are more efficient, or if the cost of business travel is higher than the guideline rate.

“However, if they pay a rate that is higher than the Advisory Fuel Rate and can’t demonstrate the electricity cost per mile is higher, they will have to treat any excess as taxable profit and as earnings for Class 1 National Insurance purposes.”

For many years, ACFO has been calling on HMRC to publish official tax-free company car AFRs for plug-in vehicles. It has been ACFO’s belief that the absence of defined mileage reimbursement rates was a handicap to some organisations including plug-in vehicles on their choice lists.

Read more: Fleet News

Comments (5)

  1. Eddie


    WOW! 4ppm that is far too little, most pure EVs do 3 or 4 miles per KWH, so at 4ppm it does not even cover the money to charge the vehicle which are typicually in the 15p+ per KWH region and thi sis not even taking into account insurance, seprecation and servicing costs.

    What are you thinking?

  2. Eddie


    Typos fixed plus additions:

    WOW! 4ppm that is far too little, most pure EVs do 3 or 4 miles per Kwh, so at 4ppm it does not even cover the price to charge the vehicle which are typically in the 15p+ per Kwh region if charging at home and much more on public infratructure and this is not even taking into account insurance, deprecation and servicing costs.

    What are HMRC thinking?

  3. TimH


    I think you or I have misunderstood the post. It seems to me this is about company cars, not reimbursing use of your own car by your company. I did first read it as you did, as the approved mileage rate for expenses, but don’t think that’s the case. It would be interesting to know what we can charge as an expenses rate for using our own cars for business, maybe Trevor can advise?

    • Eddie


      Hi Tim,
      I get a car allowance and therefor get a reduced rate for mileage, fortunately I don’t do many business miles anymore and have yet to claim for any against my EV. Based on the Kwh charge for electricity at home I will be out of pocket to the tune of 10p per Kwh and if I had to purchase power on the go say at an Ecotricity motorway station I would be even further out of pocket as they charge 30p per Kwh.

    • Trevor Larkum


      Reply – yes this is just for company cars. You can continue to claim up to the same limit as petrol cars (45p/mile IIRC) for your own car from your employer. If they don’t pay that much you can claim the difference back from HMRC.

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