HMRC’s new EV mileage rates: what businesses and drivers need to know
Posted 7th October 2025
Key Takeaways (TLDR)
New split rates from 1 September 2025: HMRC now distinguishes between charging at home (8p per mile) and charging in public (14p per mile).
Why the change: Electricity costs vary widely between home and public charging. The split ensures reimbursements reflect real-world costs more accurately.
Who it affects: Company car drivers using fully electric vehicles, and the businesses reimbursing them for mileage.
Compliance matters: Using the correct rate avoids under- or over-payment, ensuring HMRC compliance and protecting both employers and employees.
Grace period: Employers had until the end of September 2025 to switch from the old flat rate to the new split rates.
Practical impact: Public charging is reimbursed at a higher rate, helping drivers cover costs when they cannot charge at home.
Business implications: Employers should update expense policies, payroll systems, and employee communications to reflect the new rates.
_________________________________________________________________________
HMRC’s 1st September 2025 update to advisory mileage rates is a significant milestone for electric‑vehicle (EV) drivers and the organisations that employ them. For the first time since launch, the Advisory Electricity Rate (AER) now distinguishes between home charging and public charging. Instead of the previous flat 7‑pence per‑mile reimbursement that has been active since September 2024, drivers of fully electric company cars now have two rates to consider:
8 pence per mile when the EV is charged at home
14 pence per mile when the EV is charged using public charging networks
This split is a move to recognise that public charging is often more expensive than home charging and aims to make reimbursements fairer. It also introduces new administrative requirements for both employers and drivers. We have taken time to digest HMRC’s changes and put this helpful guide together to let you know what has changed, why it matters and how businesses and drivers can adapt.
What has changed
From a single rate to two rates
Under the old AER, company car drivers were reimbursed a flat 7 pence per mile for electricity, regardless of where charging occurred. Fleet management bodies and EV drivers argued that the rate underestimated the cost of charging, particularly on public networks.
HMRC’s September 2025 guidance introduces two distinct rates:
| Charging location | Rate per mile (from 1 Sept 2025) | Rate per mile (prior to Sept 2025) | Notes |
|---|---|---|---|
| Home charger | 8 pence | 7 pence | Based on an average domestic electricity price of 27.04 p/kWh and weighted electrical efficiency of 3.59 miles per kWh. |
| Public charger | 14 pence | 7 pence (originally proposed at 12 pence before being corrected) | Calculated using the same efficiency figure but assuming a typical public-charging cost of 51 p/kWh. HMRC revised the public rate from 12p to 14p after industry feedback showed the earlier figure underestimated costs. |
A grace period is currently running until 30 September 2025, during which employers can still use the old 7‑pence rate. From 1 October 2025 the new split rates become active and must be applied.
Methodology behind the rates
Firstly, HMRC calculates AERs quarterly. For electric cars, the methodology considers:
Electrical efficiency:
Weighted by car sales, HMRC uses an efficiency figure of 3.59 miles per kWh
Electricity price:
Home‑charging rates are based on the Department for Energy Security and Net Zero’s domestic electricity price (27.04 p/kWh), uprated by Office for National Statistics (ONS) price data. Public‑charging rates use the Zapmap public charging price index for slow/fast chargers (up to 50 kW), uprated by ONS electricity data.
The combination yields a cost per mile of 7.52 pence at home and 14.19 pence on public charging networks, rounded to the nearest penny. HMRC emphasises that if a business can demonstrate higher actual costs – for example because the driver used an ultra‑rapid charger then employers may reimburse at a higher rate without incurring a taxable benefit.
Hybrid cars continue to be treated as petrol or diesel vehicles and use Advisory Fuel Rates (AFRs)
Standard mileage allowance payments (AMAPs)
For privately owned vehicles, HMRC’s Approved Mileage Allowance Payments remain unchanged. As it stands it is 45 pence per mile for the first 10,000 business miles and 25 pence per mile thereafter for cars and vans.. These rates apply irrespective of fuel type and should not be confused with AERs, which are for company cars only.
Why the change matters
Fairer for EV drivers
Reimbursing EV drivers at the same rate regardless of charging method disadvantaged those relying on public networks. Public charging typically includes higher electricity tariffs and 20 % VAT compared with 5 % VAT on domestic electricity. Fleet analyses showed that drivers doing even 20 % of their charging publicly could face a shortfall of more than £200 per year, and drivers relying entirely on public charging could be over £2,000 out of pocket. It’s a sizable difference in our opinion. Therefore, splitting the rates brings reimbursements closer to actual costs and supports the adoption of company‑provided EVs.
Administrative complexity
These new changes requires employees to record not only the distance travelled but also where the vehicle was charged before each trip. Journeys may need to be divided into legs – for example, mileage before the first public charge is reimbursed at 8p per mile, and mileage after at 14p per mile. Employers must ensure that their systems can handle multiple rates per journey and maintain evidence in case HMRC queries the calculations. This change does introduce additional record‑keeping but also offers more flexibility for employers as they can claim higher rates when justified
Wider policy context
We see that these split rates highlight the VAT disparity between domestic and public charging (5 % vs 20 %). This raises broader questions about tax policy and overall EV adoption. Industry bodies such as the British Vehicle Rental and Leasing Association (BVRLA) welcomed the change but continue to advocate for a third rate covering ultra‑rapid charging, where costs can exceed 80 p/kWh.
It’s important to note that employers with high‑mileage fleets may still find the new 14p rate does not fully cover public‑charging costs and should monitor usage and reimburse accordingly.
What businesses need to do moving forward
*Update your policies and systems*
Review your reimbursement policies:
Ensure that mileage policies reflect the new AERs from 1 September 2025. Include guidance on distinguishing home‑ and public‑charged miles and clarify the grace period until 30 September 2025.
Upgrade your expense systems:
Expense claims must allow employees to assign mileage to the correct rate. Platforms that support multi‑rate journeys simplify this process.
Communicate with your employees:
Provide clear instructions on how to record charging locations, keep receipts or evidence of public charging and understand that hybrid vehicles continue to use AFRs.
Continue to monitor charging costs:
If employees regularly use ultra‑rapid chargers, gather evidence of the cost per mile and reimburse at a higher rate when justified.
Consider workplace and home charging solutions
Installing workplace chargers allows employees to use home‑rate electricity while at work, reducing the need for more expensive public charging and therefore lowering reimbursement costs. At ElectrAssure we design, install and maintain workplace charging systems tailored specifically to commercial fleets. This helps to encourage employees to charge at home or at your premises for further reduced costs.
What drivers should know
Check your vehicle type:
The new AERs apply company‑owned EVs only. If you use your own car for business mileage, you should continue claiming AMAPs at 45p/25p per mile
Record charging locations:
Note where your EV was charged before each business journey. Keep receipts or logs from public charging to substantiate your claims.
Segment journeys:
When a trip involves both home‑charged and publicly charged mileage, split it accordingly. Many expense systems allow multiple entries per journey to reflect this.
Check for updates:
HMRC currently reviews AERs quarterly. Rates can rise or fall depending on electricity prices, so make sure to monitor announcements. We recommend checking the Advisory Fuel Rates .GOV page.
Wrapped Up
HMRC’s new mileage rates for electric vehicles marks a strong step forward towards equitable reimbursement for company car drivers. By recognising the cost differences between home and public charging, the split rates (8 p per mile for home charging and 14 p per mile for public charging) does provide a fairer framework, though they may still underestimate ultra‑rapid charging costs.
For businesses, these HMRC changes introduces trickier administration and a requirement for policy updates. It does however, offer an opportunity to adopt smarter charging solutions and improve cost transparency. Employees must learn to track charging locations and may need to segment their journeys. The good news is that they will benefit from reimbursements that better reflect their out‑of‑pocket expenses.
We welcome HMRC’s move towards fairer EV mileage reimbursements. We work closely with businesses across the UK to design resilient charging infrastructure and provide the tools they need to manage electrified fleets. We remains committed to supporting clients through this transition, providing robust charging infrastructure and expert advice.
