HMRC have updated the Advisory Fuel Rates, effective from 1st September 2025 with notable new rates for electric vehicles.
It’s important to understand what Advisory Fuel Rates mean for your business if you reimburse employees for business travel in company cars (in cases where you do not pay for their fuel) or require repayment for private fuel use (if you do pay for all fuel).
Here’s a quick recap of the rules surrounding advisory fuel rates and that the new rates will be.
What are Advisory Fuel Rates?
They are rates published by HMRC that may be used for reimbursement of mileage driven by company car drivers.
The rates are, as the name suggests, not compulsory. Employers are free to calculate and use their own fuel mileage rates, using the exact prices paid at the pump and the fuel consumption figures for the vehicles used.
Provided they have kept sufficient records to show how it has been calculated and are able to demonstrate that the rate paid does no more than cover the cost of fuel, then there are no tax consequences if this is what the employer chooses to do.
The same rates may be used whether:
- the employer initially pays for all fuel and the employee then reimburses the employer in respect of private mileage; or
- the employee initially pays for all fuel and the employer then reimburses the employee in respect of business mileage.
There are separate rates for petrol, diesel, LPG and fully electric cars.
HMRC reviews the rates quarterly – in March, June, September and December and for one month from the date of each change, employers may choose to use either the previous or new rates.
How have the rates changed from 1 September 2025?
| Engine Size | Petrol – amount per mile | LPG – amount per mile |
| 1400cc or less | 12p (12p) | 11p (11p) |
| 1401cc to 2000cc | 14p (14p) | 13p (13p) |
| Over 2000cc | 22p (22p) | 21p (21p) |
| Engine Size | Diesel – amount per mile |
| Up to 1600cc | 12p (11p) |
| 1601cc to 2000cc | 13p (13p) |
| Over 2000cc | 18p (17p) |
The previous rates (in brackets above) can be used until 30 September 2025. From 1st October 2025, only the new rates should be applied.
Hybrid cars continue to be treated as either petrol or diesel for reimbursement purposes.
New rules for electric vehicles
The most significant change this quarter is the introduction of two separate rates for electric vehicles. Until now, HMRC applied a single figure of 7p per mile for all charging, regardless of where it took place.
From 1st September 2025, the rate is 8p per mile for home charging and 14p per mile for public charging. This reflects the higher costs associated with public charging infrastructure compared with home charging.
This new rule represents a shift in HMRC policy, acknowledging that electric vehicles are now a mainstream part of company car arrangements rather than the exception.
As always, if you need our help or advice get in touch at enquiries@cowgills.co.uk
