HMRC electric car mileage rates 2026: the 7p and 15p advisory electricity rate explained

HMRC's mileage rate for fully electric company cars, the Advisory Electricity Rate (AER), is 7p per mile when the car is charged at home and 15p per mile when it is charged at a public charger, in the rates applying from 1 September 2026. HMRC reviews it every quarter, next on 1 December 2026. If the electric car belongs to the employee, the AER does not apply: the approved mileage allowance (AMAP) of 55p a mile for the first 10,000 business miles does.

This guide is for payroll, finance and fleet teams. It sets out which rate applies to which car, how the AER is built, what 7p a mile means per kWh, who gains and who loses in pounds, the actual-cost alternative for company cars, the evidence HMRC expects and the wording your policy needs. Throughout, we show where measured data, the kind Voltaback captures from the car, replaces estimates.

The rates at a glance

Advisory electricity rates for fully electric company cars

Advisory fuel rates for petrol, diesel and LPG company cars, from 1 September 2026

Hybrid cars, including plug-in hybrids, use the petrol or diesel rate: HMRC says hybrids "are treated as either petrol or diesel cars" for advisory fuel rates.

Approved mileage allowance payments for employees' own vehicles, 2026 to 2027

The car rate for the first 10,000 miles rose from 45p to 55p for 2026 to 2027. A passenger payment of 5p per mile can be added for carrying colleagues on business journeys.

Sources: Advisory fuel rates, HMRC, Travel, mileage and fuel rates and allowances, HMRC.

Which rate applies to which car?

The single most common mistake is using the wrong table. The rule depends on who owns the car, not on its fuel.

HMRC's guidance is explicit: the advisory rates "only apply to employees using a company car", and "you must not use these rates in any other circumstances". So an employee driving their own Tesla on business is paid AMAP, not 7p.

What the AER is used for

The advisory rates have two uses:

1. Reimbursing business miles in a company car, when the employee paid for the fuel or electricity.
2. Calculating what an employee repays for private miles when the employer paid for the fuel.

The second use matters for petrol, diesel and hybrid cars, because private fuel paid by the employer triggers the car fuel benefit charge unless the employee makes good the full cost of private fuel, by 6 July after the end of the tax year. For a fully electric car, it matters much less: electricity is not fuel for the car fuel benefit charge, so an employer that pays for the electricity of private miles creates no fuel benefit (EIM23900).

Sources: EIM23900, HMRC, EIM25500, HMRC.

How HMRC sets the AER

• Efficiency assumption: HMRC uses 3.59 miles per kWh, weighted by car sales.
• Price assumption: a home electricity price and a public charging price, which is why there are two rates.
• Rounding: rates are set in whole pence.
• Review: every quarter, on 1 March, 1 June, 1 September and 1 December. The 7p and 15p rates were unchanged between June and September 2026.
• Transition: you may keep using the previous rates for up to one month after new rates apply.

Trips charged at home and in public

Many trips use both: the car leaves home full and tops up at a rapid charger on the motorway. HMRC accepts that you "apportion the mileage based on how much charging happens at each place", as long as the calculation is "fair and reasonable".

Example: a driver covers 1,000 business miles in a month. The car took on 240 kWh at home and 80 kWh at public chargers, so 75 % of the energy came from home.

• 750 miles x 7p = £52.50
• 250 miles x 15p = £37.50
• Total: £90.00, instead of £70 at the home rate only or £150 at the public rate only.

The split requires knowing where the car was charged, which a mileage log alone does not show. Car-side charging data, or charge card statements for the public part, provide it.

Calculating a monthly AER claim, step by step

1. Total the business miles for the month from the mileage log. Commuting between home and a permanent workplace is private, not business.
2. Find the share of energy charged at home and in public for the period, from car data or charge card statements.
3. Split the business miles in the same proportion.
4. Apply the rates in force on the date of the journeys: 7p for the home share, 15p for the public share, from 1 September 2026.
5. Deduct anything already paid by the employer for the same energy, typically public sessions on a company charge card. Paying the 15p rate for miles already charged on the card would pay twice.
6. Pay through payroll or expenses, and keep the calculation with the mileage record.

What 7p a mile means in pence per kWh

A rate per mile hides a price per kWh. Multiply the rate by the car's efficiency:

• At HMRC's 3.59 miles per kWh: 7p a mile = about 25.1p per kWh.
• At a more realistic year-round 0.32 kWh per mile (about 3.1 miles per kWh, winter and charging losses included): 7p a mile = about 21.8p per kWh.

Compare that with what drivers actually pay. Under the Ofgem price cap for October to December 2026, standard variable electricity costs 26.32p per kWh. EV tariffs sell a night window at roughly 7p to 9p. The price per kWh guide details the components.

Source: Ofgem price cap, October to December 2026.

Who wins and who loses: per 10,000 business miles

At 0.32 kWh per mile, 10,000 miles need 3,200 kWh. The AER pays £700 whatever the tariff.

A driver whose car achieves HMRC's 3.59 miles per kWh needs about 2,786 kWh for the same miles, so on the price cap the loss shrinks to about £33. Either way, the pattern is the same: the AER rewards drivers on cheap EV tariffs and penalises drivers on standard tariffs, for identical work.

Public charging: 15p a mile against real prices

At 0.32 kWh per mile, 15p a mile pays about 47p per kWh. Zapmap's index put the average price at 54p per kWh on slow and fast public chargers and 79p per kWh on rapid and ultra-rapid chargers in September 2026. A mile on a rapid charger therefore costs about 25p, and a driver paid 15p loses about 10p a mile.

That is why many employers give drivers a charge card for public charging instead. For a company car, a charge card for public chargepoints is not a taxable benefit (s.239(4)), and there is nothing to reimburse.

Source: Zapmap charging price index.

The alternative for company cars: actual cost, private miles included

For a company car, the AER is optional. HMRC's manual sets out a second route: the employer repays the actual cost of the electricity used to charge the car, at home or in public. Under s.239(2) ITEPA 2003 there is no tax or NIC charge, and HMRC's flowchart covers "business and private mileage". The condition is that the reimbursement is "solely for the company car".

Paying only the business share of the actual cost is also legal: the employer can always repay less than the exemption allows. It is a policy choice, not an HMRC method. The employer's guide to home charging discusses which policy fits which fleet.

Sources: s.239 ITEPA 2003, NIM06440, HMRC.

Which method suits which fleet?

• AER suits fleets with a high share of business miles, drivers mostly on EV tariffs, little private use, and an existing mileage capture process. It needs no tariff data.
• Actual cost suits fleets where cars are a benefit with heavy private use, drivers on mixed tariffs, or where fairness between drivers matters to HR and unions. It repays exactly what was spent.
• A hybrid policy is common in transition: actual cost for home charging, a charge card for public charging, AER only as a fallback for drivers who decline to connect their car.

Whatever the choice, apply it consistently to comparable drivers, and write it down: an unwritten practice is the first thing HMRC asks about.

Salary sacrifice cars

A car provided through a salary sacrifice arrangement is still a company car for tax. The AER and the actual-cost exemption apply in exactly the same way. The monthly sacrifice usually covers the lease, insurance and maintenance, but not the electricity, so the question of how to repay home charging remains. Cars emitting 75g/km or less are outside the optional remuneration (OpRA) rules, which is why electric salary sacrifice keeps its tax advantage; check those rules before bundling any other running cost into a sacrifice.

Paying more, or less, than the AER

Paying above the advisory rate

HMRC allows a higher rate "as long as you can show that the fuel cost per mile is higher". For an EV, that means showing the electricity cost per mile is higher, for example a driver on a 28p tariff in a large car using 0.40 kWh per mile (11.2p a mile). Without that evidence, the excess over the advisory rate is taxable as earnings and subject to Class 1 NIC through payroll.

In practice, when an employer wants to pay more than 7p because its drivers' tariffs are higher, the cleanest route is to switch to actual cost: the higher payment is then the measured cost, and the evidence is built in.

Paying less, or nothing

If the employer pays less than the electricity cost of business miles, or nothing, the driver of a company car can claim tax relief on the electricity cost of business miles under ss.337 and 338 ITEPA 2003, usually through form P87. Private miles get no relief. The relief is worth 20 % or 40 % of the cost, so it never fully compensates the driver.

Source: Claim income tax relief for employment expenses (P87), HMRC.

Employees' own electric cars: AMAP, not AER

When an employee uses their own EV for work, the employer can pay up to 55p per business mile for the first 10,000 miles in 2026 to 2027, then 25p, tax and NIC free. There is no separate electric rate and no energy measurement: the rate is meant to cover all running costs, depreciation included.

Three points to watch:

• Electricity repaid for an employee's own car is not covered by s.239: if the employer repays home charging for private use of a private car, it is taxed as earnings.
• If the employer pays less than AMAP, the employee can claim Mileage Allowance Relief on the difference.
• Charging an employee's own car at work is not a taxable benefit, under the workplace charging exemption in place since 6 April 2018.

What AMAP costs compared with a company EV

AMAP is generous for an electric car, because it is designed to cover depreciation, insurance and maintenance as well as fuel. An employee driving 10,000 business miles a year in their own EV can receive £5,500 tax free, while the electricity for those miles costs roughly £224 to £842 depending on the tariff. For high-mileage employees, a company EV with the electricity repaid at cost is often cheaper for the employer, and it gives the company control over the car's condition, insurance and duty of care. The grey fleet question is covered in more depth in the fleet mileage tracking guide.

Hybrids and plug-in hybrids

A plug-in hybrid uses the petrol or diesel AFR for its engine size, even when most of its miles are electric. That over-pays a PHEV that is plugged in every night and under-pays one that never is. Measured data shows which case each car is in: a PHEV that is never charged at home costs the company in fuel and in CO2 reporting, and a car-side view of charging sessions reveals it.

For PHEVs where the employer pays fuel cards, remember the car fuel benefit charge on private petrol or diesel unless the driver makes good the full private cost by 6 July after the tax year. Electricity charged into the PHEV is still not fuel for that charge.

Common mistakes to avoid

• Using AMAP for a company car. 55p a mile in a company EV is mostly taxable: only the advisory rate is tax free.
• Paying the public rate for home charging, or a single blended rate without a fair apportionment.
• Forgetting the quarterly review. A rate that was right in June may be wrong in December; diarise 1 March, 1 June, 1 September and 1 December.
• Paying for public sessions twice: once on the company charge card, once through the 15p rate.
• Repaying the whole household bill, or a fixed monthly sum "for charging". A flat amount is taxed as earnings; only the company car's electricity is exempt.
• Counting commuting as business mileage. Home to a permanent workplace is private travel.
• Treating PHEVs as electric. They use the petrol or diesel AFR, and private fuel can trigger the fuel benefit charge.
• Leaving the policy unchanged after a tariff or rate change. Review the policy wording at least once a year.

The evidence HMRC expects

Mileage payments are a frequent topic in HMRC employer compliance checks. Keep, for each driver:

• A business mileage record: date, start and end points or purpose, miles. The guide to company car mileage logs shows what a compliant log contains.
• For the AER split: where the car was charged (home or public), and the basis of the apportionment.
• For actual cost: the kWh charged for the company car, separate from the household, and the tariff applied to them.
• The policy: which method applies, which rate, and how often it is updated.

Payroll records must be kept for at least three years after the end of the tax year they relate to. If a driver's tariff changes mid-month, keep both rates and the date of the change: sessions before and after are valued differently under the actual-cost method, and a single average rate would no longer match the evidence.

A note on VAT

Employers can recover input VAT on the fuel element of mileage payments only when supported by VAT receipts. For home charging, there is currently nothing to recover: domestic electricity in Great Britain is zero-rated from 1 October 2026 to 31 March 2027, instead of 5 %. Public charging carries 20 % VAT, which is recoverable with valid receipts, another reason to route public charging through a company charge card.

Source: Revenue and Customs Brief 10 (2026), HMRC.

Worked example: AER or actual cost on 100 company EVs

Assumptions per driver: 12,000 business miles and 6,000 private miles a year, 80 % of business miles charged at home, 0.32 kWh per mile. Drivers' tariffs: 40 % on an EV tariff at 7p, 60 % on the price cap rate of 26.32p, so an average of about 18.6p per kWh. Public charging is on a company card in both cases, so we compare home charging only.

What the table shows:

• Actual cost on business miles is about £10,000 a year cheaper than the AER for this fleet, because the company stops paying 21.8p for kWh that cost 7p.
• Covering private miles too costs about £25,600 more than the AER, for a benefit worth £928 a year to each driver, tax and NIC free. To give a higher-rate taxpayer the same net amount in salary, the company would need about £1,600 of gross pay per driver, plus 15 % employer NIC.

You can run the same comparison on your own fleet with the home charging cost simulator.

What your reimbursement policy should say

A short, clear policy avoids most disputes and most HMRC questions:

1. Scope: which cars (company EVs, PHEVs, own cars) and which drivers.
2. Method: AER per business mile, or actual cost of electricity, and whether private miles are covered.
3. Rates: for AER, "HMRC's current advisory electricity rate for home or public charging, updated each quarter"; for actual cost, "your tariff at the time of charging".
4. Mixed trips: how home and public charging are apportioned.
5. Public charging: charge card or reimbursement, and which networks.
6. Evidence: what the driver provides, or which tool captures it, and how often.
7. Data: what is collected, who sees it, and that location data is not shared with the company.
8. Payment: through payroll, monthly.

The guide to expense claims for home charging covers the transition period while no automated process is in place.

Measuring instead of estimating

Both methods need data that drivers find tedious to provide: business miles and charging location for the AER, kWh and tariff for actual cost. Voltaback captures them from the car itself, for more than 48 brands, with nothing to fit:

• For actual cost, each home session is valued at the driver's tariff at the time of charging. Voltaback relies on the home's MID-certified meter, not on a standalone cable meter, for the household price.
• For the AER, Voltaback can provide the miles and whether each charge took place at home or in public, the input needed for the 7p and 15p split.
• For payroll, one monthly export ready to import into your payroll software.

The measurement has been audited by an independent third party (1.22 % relative error), the company never receives the car's location, and Voltaback has been ISO 27001 certified since 2 December 2025.

Pay what drivers actually spend

The AER is a convenient average, and for some fleets it is enough. But for company EVs, HMRC already allows something better: repaying the real electricity cost, private miles included, with no tax for anyone. What used to make that impractical was evidence, and that is now a data problem, not a paperwork one.

See how home charging reimbursement works with Voltaback, or talk to our team to compare AER and actual cost on your own fleet.