Electric Vehicle Mileage Allowances Explained for UK Businesses

Electric vehicles are becoming increasingly common in UK businesses, but the rules around mileage claims can still cause confusion.

The main issue is that HMRC uses different mileage systems depending on whether the vehicle is a company car or a privately owned vehicle. The rules also differ slightly for electric, hybrid, petrol and diesel vehicles.

In this guide, we explain:

• The difference between HMRC mileage schemes

• Which rates apply to electric and hybrid vehicles

• How mileage reimbursements are treated for tax

• The current rules for company cars

• Grants available for workplace EV charging

HMRC Mileage Rules: The Two Systems You Need to Know

There are two main HMRC mileage systems used by businesses:

1. Advisory Fuel Rates (AFRs)

Advisory Fuel Rates apply when an employee drives a company car.

These rates are designed to reimburse the cost of fuel or electricity used for business journeys in a company-owned vehicle.

AFRs are also used when employees repay the business for private fuel usage in a company car.

2. Approved Mileage Allowance Payments (AMAPs)

Approved Mileage Allowance Payments apply when an employee uses their own personal vehicle for business travel.

Unlike AFRs, AMAPs are intended to cover:

• Fuel or electricity

• Wear and tear

• Servicing and maintenance

• Insurance

• Depreciation

This is why AMAP rates are generally much higher than AFRs.

Mileage Rates for Electric Company Cars

If an employee drives a fully electric company car, HMRC’s Advisory Electricity Rate (AER) applies.

HMRC now recognises separate charging costs for:

• Home charging

• Public charging

The rates are reviewed quarterly and may change on:

• 1 March

• 1 June

• 1 September

• 1 December

Because the rates change regularly, businesses should always check the latest HMRC guidance before processing mileage claims.

What About Hybrid Company Cars?

Hybrid vehicles do not have a separate HMRC mileage category.

Instead, HMRC treats hybrid cars as either:

• Petrol vehicles, or

• Diesel vehicles

This means businesses must use the appropriate Advisory Fuel Rate based on the vehicle’s engine type and size.

Mileage Rates for Employees Using Their Own Vehicle

If employees use their own electric, hybrid, petrol or diesel vehicle for work journeys, Approved Mileage Allowance Payments (AMAPs) apply instead.

For cars and vans, HMRC currently allows:

• 45p per mile for the first 10,000 business miles in a tax year

• 25p per mile thereafter

These rates are the same regardless of whether the vehicle is electric, hybrid, petrol or diesel.

Businesses can reimburse employees at lower rates, but employees may then be able to claim Mileage Allowance Relief from HMRC on the shortfall.

If employers reimburse above HMRC’s approved rates, the excess may become taxable.

Are Mileage Reimbursements Taxable?

Mileage reimbursements are usually tax-free if they stay within HMRC’s approved limits.

However, tax complications can arise if:

• Employees receive more than the approved mileage rate

• Company fuel is used for private journeys without repayment

• Fuel benefits are provided incorrectly

In these situations:

• Employees may face a Benefit in Kind tax charge

• Employers may need to pay Class 1A National Insurance

This is particularly important for company cars.

Electric company cars are often more tax-efficient because Benefit in Kind rates for zero-emission vehicles remain comparatively low versus petrol and diesel alternatives.

Can Sole Traders Claim Electric Vehicle Mileage?

Yes.

Sole traders and self-employed individuals can usually claim business mileage using HMRC’s simplified expenses method.

This means they can use the approved mileage rates instead of calculating actual running costs.

However, you generally cannot use simplified expenses if you have already claimed capital allowances on the vehicle.

Can Businesses Reclaim VAT on Mileage?

VAT rules are slightly different from income tax rules.

If a VAT-registered business reimburses employees for fuel used on business journeys, it may be possible to reclaim VAT on the fuel element of the mileage claim.

To do this correctly, businesses usually need:

• Valid VAT receipts

• Accurate mileage records

• The correct HMRC advisory fuel rates

Electricity reimbursement rules can be more complex than petrol and diesel claims, especially where charging takes place at home.

Because VAT treatment can vary depending on who paid for the electricity and where the vehicle was charged, businesses should keep detailed records.

Workplace Charging Scheme (WCS)

Businesses installing EV chargers may be eligible for support through the Workplace Charging Scheme.

The scheme currently covers up to 75% of installation costs, capped at:

• £500 per socket

• Up to 40 sockets across all sites per applicant

The scheme is available to eligible:

• Businesses

• Charities

• Public sector organisations

• Some small accommodation businesses

Applicants must normally have:

• Dedicated off-street parking

• Permission from the landlord if the property is leased

• An eligible OZEV-approved installer

The scheme is currently scheduled to run until 31 March 2027.

Are There Grants for Electric Vehicles?

Some new zero-emission vehicles may qualify for government grants.

Where available, the discount is usually applied automatically by the dealer, rather than through a separate application process.

Eligibility varies depending on vehicle type and scheme availability.

Scenario	HMRC System Used	Typical Rate Type	What It Covers	Applies To
Employee drives a company petrol or diesel car	Advisory Fuel Rates (AFR)	Per mile fuel rate	Fuel only	Company-owned vehicles
Employee drives a company electric car	Advisory Electricity Rate (AER)	Per mile electricity rate	Electricity only	Fully electric company cars
Employee drives a company hybrid car	AFR (petrol or diesel category)	Per mile fuel rate	Fuel only	Hybrid company cars
Employee uses their own vehicle for work	Approved Mileage Allowance Payments (AMAPs)	45p / 25p per mile	Fuel, maintenance, depreciation, insurance and wear & tear	Personally owned vehicles
Sole trader using simplified expenses	AMAPs	45p / 25p per mile	Overall vehicle running costs	Self-employed business travel

Final Thoughts

Electric vehicle mileage claims are not necessarily more complicated than traditional mileage claims — but businesses do need to understand which HMRC system applies.

The key distinction is simple:

• Company car = Advisory Fuel or Electricity Rates

• Personal vehicle = Approved Mileage Allowance Payments

Getting this wrong can lead to unnecessary tax exposure, incorrect reimbursements, or missed reliefs.

As HMRC rates and EV incentives continue to evolve, it’s worth reviewing your mileage and expenses policies regularly to ensure they remain compliant and tax efficient.

If you’re unsure which mileage rules apply to your business, or you want to make sure you’re claiming expenses as tax efficiently as possible, professional advice can save you time and prevent costly mistakes. The team at Ledgers Accountants can help with mileage claims, electric vehicle tax planning, VAT recovery, Benefits in Kind, and wider business expense management. Get in touch with Ledgers Accountants today to discuss how to keep your business compliant while maximising the tax reliefs available to you.

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