New two-tier mileage rates for electric vehicles
The amount that employers can reimburse staff for business travel in company cars changes from 1 September 2025. What are the new rates, and why is this update different to previous ones?
Advisory fuel rates for company cars are updated by HMRC on a quarterly basis due to fluctuations in fuel prices. The rates determine the amount that can be paid to an employee using a company car for business mileage, or where an employee has to reimburse their employer for private journeys. Where HMRC’s rates are used, there are no income tax consequences for the employee. HMRC has now published the advisory rates applicable from 1 September 2025. The rate per mile will be:
| Engine size | Petrol | LPG |
|---|---|---|
| 1,400cc or less | 12p | 11p |
| 1,401cc to 2,000cc | 14p | 13p |
| Over 2,000cc | 22p | 21p |
| Engine size | Diesel |
|---|---|
| 1,600cc or less | 12p |
| 1,601cc to 2,000cc | 13p |
| Over 2,000cc | 18p |
The big difference this time is the introduction of a second electricity rate for fully electric cars. For 1 September, the two rates will be:
- 8 pence per mile for home charging
- 12 pence per mile for public charging
Related Topics
-
Do dividend waivers still work?
You need to take a dividend from your company but there’s just one problem. Your business partner, who is also a 50% shareholder, doesn’t want to take any more income from the company during this tax year. What’s the solution?
-
Save tax by combining directors’ loan accounts
You started a company last year and it’s time to prepare its first accounts. Your director’s loan account (DLA) is in credit but your spouse’s is overdrawn. Might amalgamating the DLAs avoid or reduce a tax charge?
-
Updated guidance on mandatory payrolling of benefits in kind
Much like the rollout of mandatory payrolling of benefits in kind, HMRC guidance on the matter is coming in dribs and drabs. What's the latest?