If you provide company cars to your team — or you drive one yourself — it’s important to understand how HMRC’s advisory fuel rates work. These fuel-only rates determine how much you can reimburse (or charge back) for business and private mileage without triggering extra tax or National Insurance.
HMRC updates these rates every quarter, so staying on top of the rules will help you keep your payroll tidy and avoid unexpected tax charges.
Let’s break down when the rates apply, how to use them correctly, and what’s changing for electric vehicles.
When Can You Use Advisory Fuel Rates?
Advisory fuel rates only apply in two situations:
- When reimbursing employees for business travel in a company car, and
- When employees repay the cost of private fuel that the employer has covered.
The rate you should use depends on:
- the fuel type,
- engine size (for petrol, diesel and hybrids), and
- for electric cars from 1 September 2025, whether the car was charged at home or at a public charging point.
You’ll find the most up-to-date rates on Gov.uk — they change every quarter on:
1 March, 1 June, 1 September and 1 December.
Reimbursing Employees for Business Mileage
If an employee pays for fuel themselves while completing a business journey in a company car, you’ll usually reimburse them through a mileage allowance.
If you stick to HMRC’s advisory fuel rates:
- the reimbursement is tax-free, and
- it’s free of National Insurance.
You can pay more than the advisory rate, but only if you can prove the actual fuel cost is higher. If there’s no evidence to support an increased rate, the excess becomes taxable earnings, which means additional tax and NI for both employer and employee.
Special rules for electric company cars (from 1 September 2025)
For electric vehicles, HMRC applies different advisory rates depending on where the electricity was sourced:
- Lower rate for mileage powered by home charging
- Higher rate for mileage powered by public charging
If a journey uses both types of charging, you’ll need to apportion the business miles.
Example: Business Mileage for an Electric Company Car
Laura drives an electric company car. On 27 November 2025, she travels 154 business miles to visit a customer.
- She fully charged the car at home beforehand.
- After 65 miles, she stops at a motorway service station and recharges using a public charger.
- She completes the journey without further charging.
Her employer reimburses her using the advisory rates:
- 8p per mile for the 65 home-charged miles
- 14p per mile for the remaining 89 public-charged miles
Laura receives £17.66 tax-free.
Repaying Fuel for Private Mileage
If an employer pays for all of an employee’s fuel — including fuel used for private journeys — a fuel benefit charge will normally apply. This can result in a sizeable benefit-in-kind tax bill.
However, the employee can avoid the charge if they repay the full cost of all private fuel. They can use the advisory fuel rates to calculate how much they owe.
Important deadlines:
- If car and fuel benefits are payrolled, the employee must repay the amount by 1 June following the tax year.
- If benefits are reported on the P11D, the deadline is 6 July.
Partial repayment doesn’t reduce the charge. It’s all or nothing — the employee must repay 100% of the private fuel cost to eliminate the benefit.
Need Help Managing Company Car Mileage and Fuel Benefits?
Using the correct advisory rates can help you stay compliant, save tax, and avoid benefit-in-kind surprises. If you’d like advice on company car policies, payroll, or fuel benefit calculations, get in touch with Jon or the team at Jon Davies Accountants. We’re here to make the rules simple — and help your business stay on the right track.
If you found this useful, please share it using the icons at the side of the page, or leave a comment below.
Any questions?
If you’d like a meeting or a video call to discuss this, please get in touch with your favourite Liverpool accountant
- You can ring us on 0151 380 8080
- You can email us at gr****@*********************co.uk