HMRC cuts electric company car mileage rate | New AFRs from September 1

HMRC has published new Advisory Fuel Rates (AFRs), effective from September 1, which include a 1 pence per mile (ppm) cut to the Advisory Electricity Rate (AER), from 8-7ppm.

It follows a 1p cut (from 9-8ppm) when the electric company car mileage rate was last reviewed in May.

Used by many electric company car drivers to claim back fuel costs from their employer, the new AER rate will be met with dismay by many fleets who say that the mileage rate does not adequately reflect the true cost of charging being faced by company car drivers. (Read our special report into home, work and public charging best practice.)

In its Tax and Regulation Manifesto, published ahead of the forthcoming General Election, the Association of Fleet Professionals (AFP) has called for the AER to be reviewed.

It says that having one rate for all vehicles – covering every vehicle from small cars to large vans – does not work, especially with the one rate only focusing on those that charge at home.

The AER for fully electric cars is calculated using electrical price data from: the Department for Energy Security and Net Zero (DESNZ); Office for National Statistics (ONS); car electrical consumption rates from the Department for Transport (DfT); and annual car sales volumes to businesses from Fleet Audits average for the past three years.

The DESNZ annually published “pence per kilowatt hour” cost is uprated by the quarterly ONS Consumer Prices Index for electricity to account for quarterly price variations, says HMRC.

The value of the annual equivalent rate is then calculated by taking the cost of electricity per mile for each model provided by the DfT and electricity price data from DESNZ and ONS.

Based on company car sales data across the past three years, a weighted average value of the electrical costs per mile for a fully electric car is then calculated.

AFRs also cut for diesel and petrol company cars

AFRs for diesel company cars have all decreased. A diesel company car with an engine size of more than 2,000cc is cut from 20-18ppm, while the new AFR for a diesel vehicle with an engine from 1,601-2,000cc falls from 15-14ppm.

For diesel cars up to 1,600cc, the new reimbursement rate will be 12ppm, down from 13ppm. 

All three rates for petrol company cars have also been cut. 

The AFR for petrol vehicles up to 1,400cc decreases by 1ppm, from 14-13ppm, and falls by the same amount for the 1,401-2,000cc bracket, from 16-15ppm.

For vehicles with a petrol engine over 2,000cc, the AFR has been cut by 2ppm, from 26-24ppm. 

The rates for LPG vehicles, meanwhile, have remained unchanged, staying at 11ppm for vehicles up to 1,400cc, 13ppm for vehicles with an engine size of 1,401-2,000cc, and at 21ppm for vehicles with an engine greater than 2,000cc.

Hybrid cars are treated as either petrol or diesel cars for AFR purposes.

Full tables and rates are available on our Fleet FAQ page. 

Diesel AFR methodology

Petrol AFR methodology  

LPG AFR methodology