Electric Car Mileage Rates: Understanding HMRC Guidelines for 2024

As electric vehicles (EVs) have become increasingly popular in the UK, it is crucial for businesses and employees to understand the HM Revenue and Customs (HMRC) mileage rates for electric cars. This guide will explore the current electric car mileage allowance, how they compare to traditional fuel vehicles, and what factors influence these rates. Whether you’re an employee using a personal electric car for work or a business owner managing a fleet of EVs, we’ll help you navigate the complexities of mileage reimbursement and tax implications.

What is the HMRC mileage rate for electric cars?

The HMRC electric car mileage allowance depends on whether you’re using a personal vehicle or a company-owned car for business purposes. For personal electric vehicles used for work, the rates are the same as those for petrol and diesel cars under the Approved Mileage Allowance Payments (AMAPs) scheme:

• 45p per mile for the first 10,000 miles
• 25p per mile for any additional miles thereafter

For company-owned electric cars, HMRC has introduced a specific Advisory Electricity Rate (AER). As of September 1, 2024, the electric car mileage allowance for company vehicles is set at 7p per mile. This rate is designed to cover the cost of electricity used for business travel in pure electric company cars.

What are the HMRC business mileage rates?

The HMRC business mileage rates vary depending on the type of vehicle and whether it’s personally owned or provided by the company. Here’s a breakdown of the current rates:

These rates are applicable for the 2024/25 tax year and are subject to change. It is important to note that the rates for personally owned vehicles (45p/25p) are tax-free allowances, while the company car rates are used for reimbursing fuel costs only.

How are mileage rates calculated?

HMRC calculates and revises mileage rates based on several factors, including:

• Average fuel prices (petrol, diesel, and electricity)
• Vehicle efficiency and running costs
• Market trends and adoption rates of electric vehicles
• Feedback from businesses and industry stakeholders

The Advisory Fuel Rates (AFRs) for petrol and diesel company cars are typically reviewed quarterly, with changes implemented on March 1, June 1, September 1, and December 1 each year. The Advisory Electricity Rate (AER) for electric company cars is also subject to periodic review, although changes may not occur as frequently.

For personally owned vehicles, the AMAP rates (45p/25p) have remained stable for several years. However, HMRC may consider adjusting these rates in the future to reflect changes in vehicle technology and running costs, particularly as electric vehicles become more prevalent.

Can you still claim 45p per mile for an electric car?

Yes, you can claim 45p per mile for the first 10,000 miles when using a personal electric car for business purposes. This rate applies to all cars, regardless of their fuel type (petrol, diesel, hybrid, or electric). However, it is crucial to understand the distinction between personal and company-owned vehicles:

• Personal electric vehicles: Employees can claim up to 45p per mile for the first 10,000 miles and 25p per mile thereafter using the Approved Mileage Allowance Payments (AMAPs) scheme. This is a tax-free allowance that covers all vehicle-related expenses, including electricity costs, wear and tear, and insurance.
• Company-owned electric vehicles: For business travel in a company-provided electric car, employees should use the Advisory Electricity Rate of 7p per mile (as of September 1, 2024) for reimbursement of electricity costs only. This lower rate reflects the reduced running costs of electric vehicles compared to their petrol or diesel counterparts.

It is worth noting that if an employer pays less than the approved amount for business mileage in a personal vehicle, the employee may be able to claim Mileage Allowance Relief (MAR) on the difference through their tax return.

As the adoption of electric vehicles continues to grow, businesses are adapting their mileage reimbursement policies to accommodate this shift. For example, Royal Mail has been trialling a new reimbursement tool called Paua Reimburse, which aims to provide fair compensation for electric company car drivers based on their actual electricity costs. This type of innovation demonstrates the evolving landscape of mileage reimbursement for electric vehicles in the UK business sector.

For those considering a transition to electric vehicles, it is worth noting that renewable diesel may be a viable alternative as an intermediate step. This option can help reduce carbon emissions while maintaining the familiarity of traditional fuel infrastructure.

Additionally, businesses can explore ways to reduce insurance premiums through GPS tracking, which can be particularly beneficial for fleets transitioning to electric vehicles. These tracking systems can provide valuable data on driving behaviour and vehicle usage, potentially leading to cost savings and improved fleet management.

Conclusion

For businesses looking to streamline their mileage tracking and reimbursement processes, WEX offers comprehensive fleet management solutions that can help automate these tasks and ensure compliance with HMRC guidelines. 

As we progress towards a more sustainable future, understanding the nuances of electric car mileage rates and reimbursement policies will become increasingly important for businesses and employees. By staying informed about HMRC guidelines and leveraging modern fleet management tools, organisations can efficiently manage their electric vehicle fleets while ensuring fair compensation for their employees’ business travel.