The approved mileage allowance rate is paid when an employee uses their own car for business purposes, and is designed to include the cost of running the car (not just the fuel). For company’s which provide their employees with a car, the advisory fuel rates are applied to reimburse for the fuel cost alone.

Currently HMRC does not consider electricity as a fuel, so where does it fit into the picture?

There are various possible ways of working out the payable rate for these cars, but the key is to reimburse the employee at a rate which reflects the true cost to the employee.


1.   The logical, yet complicated way of calculating the allowance would be to calculate the percentage of electricity used to charge the vehicle (from a domestic supply). The rate per mile would be calculated using the car manufacturers published range and kWh battery rating.


2.   If the car in question is a company vehicle, the advisory fuel rate could be paid (based on a petrol or diesel engine)


3.   If the vehicle is personal and used for business, the approved mileage allowance of 45p per mile (up to 10,000) can be used (25p for each subsequent mile).


4.   Pay a rate than can be calculated accurately as a true cost to the employee, and can be substantiated if subject to an audit.