Electric and hybrid vehicles are becoming increasingly common in UK businesses, but many company owners and employees are still unsure about the correct HMRC mileage rates to use.
The rules can seem confusing because HMRC applies different mileage systems depending on whether the vehicle is a company car or privately owned.
In this guide, we explain HMRC’s rules for electric and hybrid vehicle mileage claims, the difference between Advisory Fuel Rates and Mileage Allowance Payments, and the tax implications businesses should understand.
How HMRC Mileage Claims Work for Electric and Hybrid Vehicles
HMRC uses two different systems for business mileage claims:
1. Advisory Fuel Rates (AFR) and Advisory Electricity Rate (AER)
Used when an employee drives a company car.
2. Approved Mileage Allowance Payments (AMAP)
Used when an employee or director uses their own personal vehicle for business journeys.
The correct method depends entirely on who owns the vehicle.
Mileage Rates for Company Electric and Hybrid Cars
If an employee drives a company-owned vehicle for business travel, HMRC allows employers to reimburse fuel or electricity costs using official advisory rates.
Advisory Fuel Rates (AFR)
HMRC Advisory Fuel Rates apply to:
- Petrol company cars
- Diesel company cars
- Hybrid company cars
These rates are designed to cover fuel costs only because the employer already pays for servicing, insurance, repairs, and depreciation.
Advisory Electricity Rate (AER)
For fully electric company cars, HMRC uses a separate Advisory Electricity Rate.
This rate is intended to reimburse the cost of electricity used for business journeys.
HMRC reviews these rates every quarter in:
- March
- June
- September
- December
Employers may use different reimbursement rates if they can demonstrate that the actual cost per mile is higher or lower.
Mileage Claims Using a Personal Vehicle
If an employee or director uses their own vehicle for business journeys, HMRC Approved Mileage Allowance Payments (AMAP) apply instead.
Unlike Advisory Fuel Rates, AMAP rates are designed to cover:
- Fuel or electricity
- Vehicle maintenance
- Insurance
- Tyres
- Servicing
- General wear and tear
- Depreciation
HMRC Approved Mileage Allowance Rates
Current HMRC AMAP rates are:
| Vehicle Type | First 10,000 Business Miles | Over 10,000 Miles |
|---|---|---|
| Cars and vans | 45p per mile | 25p per mile |
| Motorcycles | 24p per mile | 24p per mile |
| Bicycles | 20p per mile | 20p per mile |
These rates also apply to privately owned electric vehicles.
What’s the Difference Between AFR and AMAP?
The main difference is what the mileage rate is intended to cover.
Advisory Fuel Rates / Advisory Electricity Rate
- Only cover fuel or electricity costs
- Used for company cars
- Do not include wear and tear
Approved Mileage Allowance Payments (AMAP)
- Cover full running costs
- Used for privately owned vehicles
- Include maintenance and depreciation
Tax on Company Electric and Hybrid Cars
If an employee uses a company car privately, HMRC usually treats this as a Benefit in Kind (BiK).
This can result in:
- Income tax for the employee
- Class 1A National Insurance contributions for the employer
HMRC calculates the taxable benefit using factors such as:
- Vehicle list price
- CO₂ emissions
- Fuel type
Fully electric vehicles generally attract significantly lower Benefit in Kind tax rates than petrol or diesel vehicles.
HMRC Rules for Electricity Reimbursement
HMRC treats electricity for company electric cars similarly to fuel used in petrol or diesel vehicles.
However, for privately owned electric vehicles, the standard Approved Mileage Allowance Payment already includes electricity costs. This means a separate electricity reimbursement is not usually required.
Electric vehicles can offer significant tax advantages for UK businesses, particularly through lower Benefit in Kind rates for company cars.
However, using the correct HMRC mileage method is essential to ensure reimbursements remain tax-efficient and compliant.
Businesses should regularly check HMRC guidance to confirm they are using the latest approved rates and rules.
