Mileage Claim for Electric Car Rules 2023

With more than 1.1 million electric cars on the road, it’s inevitable that some of these journeys will be made for business purposes, and as such, would be eligible for mileage reclaim.

Understanding the rules relating to submitting or processing a mileage claim for electric cars can ensure they are dealt with fairly and correctly and that employees receive what they are entitled to.

In this guide, we look at the rules on claiming mileage for an electric company car and an electric privately owned car, together with the current electric car mileage rates.

 

Claiming mileage for electric company cars

 

While claiming mileage on an electric car is a relatively new area of accounting, the rules are for the most part the same as for non-electric vehicles, save except for the rate that can be claimed.

Advisory fuel rates (AFRs) are issued quarterly by HM Revenue and Customs (HMRC). They are recommended rates — reviewed by HMRC at the beginning of every March, June, September and December — and provide specific rates that employees can use to claim back from their employer the cost of business journeys for company cars.

These rates are advisory only, but will ensure that employees are not out of pocket when driving forms part of their job. As these rates are designed to only cover the cost of the fuel, and no other on-road costs, the rates are updated quarterly by HMRC to try and keep them in sync with fuel prices.

There is a separate and much lower flat rate for fully electric vehicles. From 1 September 2023, the advisory electric rate for fully electric company cars is 10 pence per mile.

The Advisory Electricity Rate (AER) is calculated similarly to an AFR, based on energy-efficiency data and the average cost of a unit of electricity at home.

There are specific rates for vehicles run on either petrol, diesel and liquefied petroleum gas (LPG), each of which also has different rates depending on the vehicles’ engine size. These rates are calculated based on an average fuel efficiency figure for vehicles sold to fleets, and the latest forecourt prices across the UK, rounded up or down to the nearest whole penny.

AFR and AER rates can be used when an employer reimburses an employee for business travel in their company cars. They can also be used when employees are asked to repay the cost of fuel used for private travel. However, they must not be used in any other circumstances.

 

Electric car mileage rates for company cars

 

The AER for a company-provided electric car is currently set at a flat rate of 10 pence per mile. This means that if an employee has an electric car as a company car, they can claim 10 pence for every mile undertaken on a business trip in that vehicle.

 

Advisory fuel rates for 2023:

From 1 September 2023, the AFR are set at:

 

Vehicle type	Rate per mile from 1 Sept 2023
Electric car	10 pence
Petrol car 1400cc or less	13 pence
Petrol car 1401cc to 2000cc	16 pence
Petrol car over 2000cc	25 pence
LPG 1400cc or less	10 pence
LPG 1401cc to 2000cc	12 pence
LPG Over 2000cc	18 pence
Diesel car 1600cc or less	12 pence
Diesel car 1601cc to 2000cc	14 pence
Diesel car Over 2000cc	19 pence

 

Previous AFRs

Drivers can use the previous rates for up to 1 month from the date any new rates apply.

From 1 September 2023, the AFR were set at:

 

Vehicle type	Rate per mile from 1 Sept 2023
Electric car	10 pence
Petrol car 1400cc or less	13 pence
Petrol car 1401cc to 2000cc	16 pence
Petrol car over 2000cc	25 pence
LPG 1400cc or less	10 pence
LPG 1401cc to 2000cc	12 pence
LPG Over 2000cc	18 pence
Diesel car 1600cc or less	12 pence
Diesel car 1601cc to 2000cc	14 pence
Diesel car Over 2000cc	19 pence

 

From 1 June 2023, the AFR were set at:

Vehicle type	Rate per mile from 1 Jun 2023
Electric car	9 pence
Petrol car 1400cc or less	13 pence
Petrol car 1401cc to 2000cc	15 pence
Petrol car over 2000cc	23 pence
LPG 1400cc or less	10 pence
LPG 1401cc to 2000cc	12 pence
LPG Over 2000cc	18 pence
Diesel car 1600cc or less	12 pence
Diesel car 1601cc to 2000cc	14 pence
Diesel car Over 2000cc	18 pence

 

 

From 1 March 2023, the AFR were set at:

Vehicle type	Rate per mile from 1 Mar 2023
Electric car	9 pence
Petrol car 1400cc or less	13 pence
Petrol car 1401cc to 2000cc	15 pence
Petrol car over 2000cc	23 pence
LPG 1400cc or less	10 pence
LPG 1401cc to 2000cc	11 pence
LPG Over 2000cc	17 pence
Diesel car 1600cc or less	13 pence
Diesel car 1601cc to 2000cc	15 pence
Diesel car Over 2000cc	20 pence

 

Between 1 December 2022 and 28 February 2023, the AFR were set at:

Vehicle type	Rate per mile 1 Dec 2022 to 28 Feb 2023
Electric car	8 pence
Petrol car 1400cc or less	14 pence
Petrol car 1401cc to 2000cc	17 pence
Petrol car over 2000cc	26 pence
LPG 1400cc or less	10 pence
LPG 1401cc to 2000cc	12 pence
LPG Over 2000cc	18 pence
Diesel car 1600cc or less	14 pence
Diesel car 1601cc to 2000cc	17 pence
Diesel car Over 2000cc	22 pence

 

Hybrid car fuel rates

Hybrid cars still don’t have their own AERs/AFRs. All hybrids, including plug-ins, are reimbursed at the same rates as a petrol or diesel car, based on their engine size (see tables above).

 

Claiming mileage for privately-owned electric cars

 

The rules on what an employee can claim differ based on the ownership of the car being used for business travel, as company cars are treated differently to privately-owned cars. In addition to the quarterly advisory fuel rates (AFRs), HMRC also provides annually updated suggested fuel reimbursement rates for business journeys undertaken in an employee’s own car. This type of payment is known as AMAP (Approved Mileage Allowance Payment).

AFR rates only apply for company-provided vehicles, where a much higher standard rate applies for mileage claims if the employee is using a privately-owned vehicle for business travel. This is because the AMAP is designed to reimburse the employee for both fuel and other on-road driving costs, including insurance, and general wear and tear. This is also an allowance ‘per employee’, so it doesn’t matter if multiple cars are used during the year.

 

Electric car mileage rates for privately-owned cars

 

When an employee uses their own car for business purposes, the mileage rate for a fully electric car is the same as for a petrol or diesel car. This is set at 45 pence per mile for the first 10,000 miles, then 25 pence per mile for any additional mileage.

The electric vehicle employee owner-driver can also claim 5 pence per mile for each passenger they drive on the same business trip.

The mile-per-hour rate for business journeys in privately-owned vehicles was increased from 40p pence per mile to 45 pence per mile in 2011/12. For employees who use their own car for business travel, the 45 pence per mile allowance is usually sufficient for covering the cost of fuel, insurance and maintenance, although HMRC may revisit the longstanding mileage allowance rate if fuel costs continue to increase.

 

Can employees claim for charging a company car at home?

 

As far as HMRC is concerned, electricity isn’t a fuel, even though it now has a per-mile rate for drivers to claim back the cost of business trips in an electric car. However, like petrol or diesel, electricity used for business mileage isn’t classed as a benefit-in-kind for tax purposes and can be claimed as an expenses claim or added to an employee’s salary.

In practice, it can be difficult to separate the cost of charging a car from the rest of an employee’s home energy bills, let alone differentiating between business and private mileage. As such, in practice, employees would typically claim the flat AER rate.

The cost per mile will be even more for a plug-in hybrid company car, based on the AFR petrol or diesel rates.

 

What are the rules for paying tax on business mileage?

 

Employers have certain tax, National Insurance (NI) and reporting obligations if they cover the costs of their employees using their own vehicles for business travel. There are two separate schemes used to deal with these mileage expenses: one for tax and one for National Insurance.

Tax

Employers are allowed to pay their employee a certain amount of money each financial year for using a privately-owned vehicle for business journeys without having to report this to HMRC. These are known as Mileage Allowance Payments (MAPs), where the level of MAPs that can be paid without having to deduct and pay tax on these is known as an ‘approved amount’.

To calculate the ‘approved amount’, the employer must multiply an employee’s annual business travel by the rate per mile for their vehicle. For hybrid (or petrol or diesel) cars and vans this is set at 45 pence per mile for the first 10,000 miles, and 25 pence per mile over this mileage. For example, if an employee travels 12,000 business miles in their car, the approved amount for the year would be £5,000 (10,000 x 45p plus 2,000 x 25p).

Anything paid above the ‘approved amount’ must be reported by the employer to HMRC on form P11D. The additional amount over the approved amount must also be added to the employee’s pay, with tax deducted and paid as normal.

The employer will not have to report to HMRC or pay tax on anything paid to their employee on anything below the approved amount, and the employee will be eligible to get tax relief (called Mileage Allowance Relief, or MAR) on the unused balance of the approved amount. The employer may want to make separate optional reports to HMRC for any unused balances under a scheme called the Mileage Allowance Relief Optional Reporting Scheme (MARORS).

However, an employee may receive a taxable benefit in connection with their electric car if their employer either pays for a vehicle charging point to be installed at the employee’s home, provides a charge card to allow access to commercial or local authority vehicle-charging points or pays to lease a battery for the employee’s car.

There’s no benefit-in-kind charge for employees charging their own cars at a workplace charging station, as HMRC doesn’t consider electricity to be a fuel.

 

National Insurance

As with tax, employers are allowed to pay their employees a certain amount of money each year without this becoming liable to National Insurance (NI) on relevant motoring expenditure (RME). This is known as a ‘qualifying amount’.

To calculate the ‘qualifying amount’ the employer will need to multiply their employee’s business miles in the earning period by 45 pence per mile.

If the RME provided by an employer to an employee in the earnings period exceeds the qualifying amount, they will need to add the excess to the employee’s other earnings for that earnings period when calculating Class 1 National Insurance (but not Pay As You Earn (PAYE) tax) through payroll. If the RME is below the qualifying amount, the employer will have nothing to report and no National Insurance to pay.

However, there’s no Mileage Allowance Relief for National Insurance, and the difference between RME and the qualifying amount cannot be carried forward to a later earnings period.