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 business miles powered by home charging
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  14 pence per mile for business miles powered by public or overnight kerbside charging

This replaces the previous flat rate of 7 pence per mile that applied 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 new guidance clarifies that the two-tier system is both driver- and trip-specific:

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  Drivers with access to a home charger may claim the 8p rate for business miles powered by home charging.

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  Drivers (including those with home chargers) may claim the 14p rate for business miles powered by public or kerbside charging, but only if they have robust evidence to demonstrate these miles were charged at the higher cost locations.

This represents a shift from earlier interpretations that strictly limited the 14p rate to drivers without home charging access. Now, HMRC acknowledges the practical reality that many drivers use mixed charging methods and allows splitting mileage claims, provided there is sufficient proof.

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  Gathering and managing evidence is critical. To claim the 14p per mile rate for specific trips, fleets and drivers must maintain detailed supporting documentation such as charging session data, receipts, vehicle telematics, or other verifiable records linking business mileage to the charging source.
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  Data limitations remain a significant hurdle. Most current EV systems and telematics do not automatically or reliably distinguish which miles were powered by home versus public charging, making compliance data-intensive and administratively challenging.
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  Compliance risks are heightened without clear proof. Incorrect claims at the higher rate may be treated by HMRC as taxable benefits in kind, exposing both drivers and employers to tax liabilities and penalties. Maintaining transparent records and consistent policies mitigates this risk.
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  Cost pressures persist for fleets relying on public charging. The 14p rate is based on average public slow/fast charging prices but excludes ultra-rapid charging costs, which may be substantially higher, affecting fleet budgeting.
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  Operational focus should be on policy design and driver education. Fleets must design clear reimbursement policies, establish processes to collect and validate charging evidence, and communicate expectations to drivers to avoid errors and disputes.

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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  Adopt a mileage reimbursement approach tied to charging cost evidence, not solely driver home charging access. Prepare to split mileage claims by charging source where evidence supports it.
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  Invest in technology and data management systems that improve visibility into charging sessions and mileage attribution to reduce administrative burden and compliance risk.
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  Educate drivers thoroughly on the importance of tracking and submitting charging receipts or data to substantiate higher-rate claims.
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  Implement clear internal policies and controls for claim validation and audit readiness, aligning with HMRC’s position.
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  Monitor ongoing regulatory updates and industry best practices to stay ahead of evolving compliance requirements.

The two-tier Advisory Electric Rate is a progressive step toward fairer reimbursement reflecting true EV running costs. However, fleets must prepare for increased data and compliance complexity as reimbursement becomes more evidence based. By focusing on clear policies, robust record-keeping, and driver engagement, fleet managers can successfully navigate this evolving landscape, controlling costs while maintaining compliance.