Navigating HMRCs two-tier Advisory Electric Rate for EVs

From 1 September 2025, HM Revenue & Customs (HMRC) implemented a new two-tier Advisory Electric Rate (AER) for company-owned electric vehicles (EVs), distinguishing reimbursement rates based on drivers’ access to home charging facilities:

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  8 pence per mile for EV drivers with access to a home charger
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  14 pence per mile for EV drivers without home charging access who rely on overnight kerbside charging

This replaces the previous flat rate of 7 pence per mile that applied uniformly regardless of charging location.

HMRC’s intent is clear: the two-tier system is designed to differentiate between distinct types of EV drivers, not to allow drivers with home charging access to claim the higher 14p/mile rate when occasionally using public fast, rapid, or ultra-rapid chargers.

This means, for example, a driver eligible for the 8 pence per mile home charging rate should not claim 14 pence per mile simply because they used a public rapid charger on a particular trip. The higher rate is reserved for those without home charging options who must rely on public charging facilities regularly, often at higher cost.

The updated AER better reflects the real-world cost differences between home and public EV charging, making reimbursement fairer by driver circumstance. However, its practical application introduces important operational considerations:

Driver categorisation is key. Fleet managers need to establish clear policies to identify which drivers qualify for the 8p or 14p rates based on their home charging access rather than attempt granular tracking of every charge event or journey segment.

Proving exact mileage powered by different charging sources is less critical than correctly assigning driver eligibility. Most EVs and telematics systems do not separately track home versus public charging per mile, and HMRC guidance confirms reimbursement should be based on the driver’s charging situation, not mixed charge claims.

Compliance risks arise if the 14p rate is claimed improperly. Drivers with home charging who claim the higher public charging rate may be subject to tax treatment on the excess reimbursement if HMRC challenges the claim, placing the onus on fleets to implement robust eligibility controls.

Cost pressures remain for those relying on public charging, especially ultra-rapid chargers. The 14p rate is set based on public slow/fast charging prices but does not fully cover the higher costs of ultra-rapid chargers commonly used by some fleets, potentially impacting budgets.

Instead of seeking to reconcile detailed charging session logs with mileage, fleets should focus on verifying home charger access, establishing consistent reimbursement frameworks, and ensuring drivers understand the rules to avoid errors and disputes.

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  Focus on defining driver eligibility for the AER tiers based on home charging access, with clear documentation and business processes to support this classification.
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  Educate drivers on reimbursement rules and reporting requirements, emphasising that public charging use does not automatically entitle a home charger user to the higher rate.
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  Monitor charging patterns and costs, particularly for drivers without home chargers, to anticipate and budget for higher public charging expenses, including ultra-rapid charging premiums.
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  Implement practical controls and policies that simplify reimbursement while managing HMRC compliance risk, avoiding excessive administrative overhead from overly complex data tracking.
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  Stay engaged with evolving HMRC guidance and industry best practice to refine your approach as EV fleet operations grow and charging infrastructures evolve.

While the two-tier AER represents a measured step towards aligning reimbursement rates with real costs, its successful implementation demands clear policies and risk management. By focusing on driver eligibility and communication rather than attempting to micro-manage every charging event, fleet managers can balance fairness, compliance, and administrative efficiency in this evolving landscape.