As of 1st September, HMRC introduced a new advisory fuel rate for business travel in fully electric cars

Advisory Fuel Rates apply where employers reimburse employees for business travel in their company cars, or require employees to repay the cost of fuel used for private travel. These rates are reviewed quarterly.


This new rate will be called the Advisory Electricity Rate (AER), and will be set at 4p per mile from 1st September, and published alongside the other Advisory Fuel Rates for petrol, diesel and LPG cars.


HMRC have said they “will now accept that if you pay up to 4 pence per mile when reimbursing your employees for business travel in a fully electric company car there is no profit. If you pay a rate per mile for business travel no higher than the Advisory Electricity Rate, HMRC will accept there’s no taxable profit and no Class 1 National Insurance to pay.”


HMRC have also stated that a higher rate can be paid for fully electric cars, if the vehicles are more efficient, or the business travel cost is higher, but this must be justifiable. If justification can’t be demonstrated the excess will be treated as taxable profit, and as earnings for Class 1 National Insurance purposes.


Plug-in hybrid and hybrid cars will continue to be treated as either petrol or diesel models for mileage reimbursement purposes.