His Majesty’s Revenue and Customs (HMRC) said it will introduce a two-tier reimbursement system for electric company car drivers from Sept. 1, replacing the current flat rate structure.
Under the new rules, company car drivers will be able to claim 8 pence per mile (ppm) when charging at home and 12 ppm when using public charging points. The change marks a shift from the existing Advisory Electric Rate (AER), which has been set at 7 ppm since September 2024.
The single-rate system, first introduced in 2018 at 4 ppm, has faced criticism for being too simplistic compared to the Advisory Fuel Rates for internal combustion vehicles, which are tiered by fuel type and engine size. Analysts and industry groups noted the scheme did not reflect differences in charging efficiency across vehicles or the higher costs of public charging, particularly at faster chargers. Fleetnews cited analysis by Paua showing drivers using public networks for as little as 20% of charging could face annual shortfalls of £200.
The AER will now be reviewed quarterly, with calculations based on the average efficiency of fleet EVs over the past three years, domestic energy prices reported by the Office for National Statistics, and Zapmap’s price index for public chargers rated at 50 kW or below. However, costs for ultra-fast chargers, averaging 76p per kWh, remain significantly higher than the benchmark used for the public charging rate, raising concerns over whether the new system fully compensates drivers. Any additional reimbursement beyond the advisory rates may be taxed as income.
The move has been welcomed by industry bodies that had long advocated for a more nuanced system. Paul Hollick, chair of the Association of Fleet Professionals, said: “This is very good news for fleets. We’ve been working alongside the BVRLA for some time to promote the idea of split public and private charging AER rates and, while it has been a long, long process, we’re delighted that HMRC has listened.”
Thomas McLennan, director of policy and public affairs at the British Vehicle Renting and Leasing Association, added: “Policy change is not usually rapid. HM Revenue & Customs and others have complex and competing priorities, but this is a great reminder that change does come when we work together – even if a lot of patience is needed.” He noted, however, that a separate rate for rapid charging could still be required.
Source: fleetnews.co.uk, autocar.co.uk
