To simplify fuel reimbursement, HMRC publishes Advisory Fuel Rates (AFRs). These rates provide a clear and consistent way to calculate fuel-only mileage costs. With this in mind, AFRs only apply to employees who drive a company car.
What are Advisory Fuel Rates?
HMRC sets Advisory Fuel Rates as pence-per-mile fuel rates. The correct rate depends on:
- The fuel type (petrol, diesel, LPG or electric)
- The engine size for petrol, diesel and LPG vehicles
- The charging location for fully electric cars
AFRs only cover fuel or electricity. They do not include:
- Servicing
- Tyres
- Insurance
- Repairs
- Depreciation
Because fuel and electricity prices change regularly, HMRC reviews the rates four times a year:
- 1 March
- 1 June
- 1 September
- 1 December
As a result, employers should check the latest rates each quarter.
Current Advisory Fuel Rates (From 1 December 2025)
HMRC introduced the the following rates on 1 December 2025. The next review will take place on 1 March 2026.
Petrol and LPG (Pence Per Mile)
| Engine Size | Petrol | LPG |
|---|---|---|
| 1400cc or less | 12p | 11p |
| 1401cc to 2000cc | 14p | 13p |
| Over 2000cc | 22p | 21p |
Diesel (Pence Per Mile)
| Engine Size | Diesel |
|---|---|
| 1600cc or less | 12p |
| 1601cc to 2000cc | 13p |
| Over 2000cc | 18p |
Advisory Electric Rates (AER) for Fully Electric Cars
HMRC now applies two separate electric rates. This distinction reflects the higher cost of public charging.
| Charging Location | Electric |
|---|---|
| Home charging | 7p |
| Public charging | 14p |
You may continue to use the previous rates for up to one month after new rates take effect. Hybrid vehicles do not have a separate Advisory Fuel Rate. Instead, you must apply the relevant petrol or diesel rate, depending on the engine type.
When You Can Use Advisory Fuel Rates
You may use Advisory Fuel Rates in only two situations:
- To reimburse an employee for business miles driven in a company car
- To calculate how much an employee must repay for private miles when the employer provides fuel
You must not use AFRs for any other purpose. In particular, you cannot use them for:
- Company vans
- Employees using their own private vehicles for work
Using the wrong rate may create unexpected tax and National Insurance liabilities.
Reimbursing Business Mileage in a Company Car
Employees often pay for fuel while travelling for work. Employers then reimburse those costs.
If you reimburse at or below the Advisory Fuel Rate:
- The payment remains tax-free for the employee
- You avoid Class 1A National Insurance on that amount
This keeps the process simple and compliant.
Paying More Than the AFR
You may pay higher rate if the actual fuel cost per mile exceeds the AFR. For instance, some vehicles consume more fuel than average.
However, you should keep clear evidence, such as:
- Fuel receipts
- Manufacturing MPG data
- Accurate mileage logs
Without supporting evidence, any amount paid above the AFR becomes taxable earnings. It will also attract Class 1 National Insurance.
Paying Less Than the AFR
You may also choose to reimburse at a lower rate. This may suit highly fuel-efficient vehicles. Even so, you should ensure that the rate fairly reflects the actual cost. Otherwise, employees may end up covering business fuel themselves.
Private Fuel and the Fuel Benefit Charge
Private use of company fuel can trigger a Fuel Benefit Charge. This charge can create a significant tax cost.
You can prevent this charge if the employee:
- Records all private mileage accurately
- Repays the full cost of private fuel using the AFR (or a higher rate)
Even a small underpayment can result in the full benefit charge applying. In some cases, a lower repayment rate may still work. However, you must show that the employee repaid the full private fuel cost.
Electric Vehicles and Mixed Charging
Many drivers charge at home and at public charging points. In these cases, you should split the mileage on a fair and reasonable basis.
For instance, you can:
- Apply the home rate to miles powered by home charging
- Apply the public rate to miles powered by public charging
Keep a note explaining how you calculated the split. Additionally, you should retain public charging receipts where possible.
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This article is for general informational purposes only and does not constitute legal or financial advice. While we aim to keep our content up to date and accurate, UK tax laws and regulations are subject to change. Please speak to an accountant or tax professional for advice tailored to your individual circumstances. Pi Accountancy accepts no responsibility for any issues arising from reliance on the information provided.