NEW ADVISORY ELECTRIC RATE FOR FULLY-ELECTRIC COMPANY CARS

ASESA Solutions Ltd - New Advisory Electric Rate for Fully-Electric Company Cars.

Introduction :

The Advisory Electric Rate (AER) is HMRC’s official mileage rate for fully electric company cars. It sets the maximum amount employers can reimburse employees for business mileage, or employees can repay their employer for private mileage, without creating any tax or National Insurance liability.

HMRC has updated its Advisory Fuel Rates (AFR) to include separate Advisory Electric Rates (AER) for electric vehicles. These rates help employers and employees calculate fair, tax-free reimbursements for electricity used on business travel.

From 1 September 2025, HMRC introduced two electric rates:

• 8 pence per mile – for home charging

• 14 pence per mile – for public charging (slow and fast chargers under 50 kW)

Employers can use these rates to reimburse employees for business mileage in fully electric company cars.

If an employee’s actual electricity cost per mile is higher than the AER (for example, when using a rapid public charger), HMRC allows a higher rate, but only where the higher cost is supported by receipts, energy statements, or charging logs.

When it becomes taxable

If employers pay more than the HMRC AER and cannot prove the cost per mile was higher, the extra amount becomes taxable. HMRC treats the excess as income, which must go through PAYE and is subject to Income Tax and National Insurance.

Similarly, if the electricity covers private mileage and the employee does not repay it, that part also becomes taxable.

In short, up to 8p (home) or 14p (public) per mile is automatically tax-free. Anything above those rates is taxable unless proper evidence supports the higher cost.

Summary :

HMRC has updated the Advisory Electric Rate (AER) for electric company cars to better reflect real charging costs. From 1 September 2025, the rate is 8p per mile for home charging and 14p per mile for public charging under 50 kW. Employers can reimburse higher rates if actual costs are proven, ensuring fair and tax-free payments for business travel.