Claiming back the cost of fuel and charging is more complex than handing over a VAT receipt – but which per-mile rates apply to you?
Fuel is one of the biggest costs of operating a fleet, and His Majesty’s Revenue & Customs (HMRC) enforces a rigid process to make sure those expenses are properly accounted for.
HMRC-approved mileage rates are published every quarter and they apply to all at-work drivers, whether they’re in a company car or van or their own. With tax penalties for getting it wrong, it’s an important system to understand. Here’s what you need to know.
What are the mileage rates for company cars and vans?
If you’re driving a company-owned vehicle – that includes pooled, daily rental and company cars – on business, then you’ll be reimbursed using HMRC’s Advisory Fuel Rates (AFRs). Employers can also use these to recoup the cost of fuel you’ve used for private journeys, if you’ve got a fuel card.
Rates are reviewed every quarter to make sure they’re realistic, and they apply to any journeys made during that period. Those updates are based on average fuel efficiency figures for fleet-operated vehicles and the most recent forecourt prices, with nine different rates based on engine size and fuel type.
Petrol cars and vans
Engine Size
Average Efficiency
Cost Per Mile
AFR
Up to 1,400cc
50.7mpg
14.1p
14p
1,401-2,000cc
42.8mpg
16.7p
17p
Over 2,000cc
27.2mpg
26.2p
26p
Diesel cars and vans
Engine Size
Average Efficiency
Cost Per Mile
AFR
Up to 1,600cc
55.7mpg
15.4p
15p
1,601-2,000cc
49.6mpg
17.3p
17p
Over 2,000cc
36.6mpg
23.4p
23p
LPG cars and vans
Engine Size
Average Efficiency
Cost Per Mile
AFR
Up to 1,400cc
40.6mpg
11.1p
11p
1,401-2,000cc
34.2mpg
13.2p
13p
Over 2,000cc
21.7mpg
20.7p
21p
What are the mileage rates for electric and hybrid company cars?
Almost two thirds (62%) of drivers are in a plug-in hybrid or electric company car, according to the latest HMRC data, and the simplistic mileage rates have been a bugbear for fleet operators since they were introduced in 2018.
Electric vehicle drivers can claim at the Advisory Electric Rate (AER), which reimburses at 8p per mile for charging at home, or 14p if they use the much pricier public networks. For journeys that use a mix of both, HMRC advises calculating a “fair and reasonable” split between the two.
The AER is adjusted every quarter to account for fluctuating energy prices, but there’s only one set of rates. Unlike AFRs, this doesn’t differentiate between the efficiency of a large SUV, and a small city car.
There are no mileage rates for hybrid cars, whether they’re ‘self-charging’ or plug-in hybrids (PHEVs). Mileage claims for both are reimbursed using the AFR system, based on the size of their engine and the fuel in their tank.
Although that doesn’t specifically cover charging costs for PHEVs, drivers who regularly plug in at home or work can usually claim at a higher rate than they’d be paying for the electricity anyway.
Can fleets set their own mileage rates?
Yes. HMRC allows fleets to set their own if they don’t match real-world costs – for example, if they’re leaving drivers out of pocket, or paying over the odds.
There is a catch. Fleets need to be ready to prove that those adjustments are accurate, otherwise they risk over or underpaid expenses being seen as additional employee income or profit for the business, and both are taxable. Sticking to the advisory rates avoids that complexity.
What can drivers claim back if they use their own car for business journeys?
Grey fleet drivers (employees using their own car for work) can claim at a much higher rate than anyone in a company car or van. The idea is that this covers not only the fuel, but costs like wear and tear and insurance, which the business would pay for if it was a company car.
Approved Mileage Allowance Payments (AMAPs) are set at 55p per mile for the first 10,000 miles, and 25p afterwards, and they apply to all vehicles and fuel types. HMRC allows an additional 5p per mile if drivers have a passenger, designed to encourage carpooling.
Employers can set their own rates, or opt not to pay them at all, while drivers getting less than the AMAP (or nothing) can claim tax relief against the equivalent cost.
