New HMRC fuel rates: what they mean for your business

Written by Dion Laycock - Partner, Tax

Published on: 28 August 2025

HMRC updates its advisory fuel rates (AFRs) every quarter to reflect changes in fuel and electricity costs. These rates apply when reimbursing employees who use company cars for business travel, or when employees repay the cost of private travel in a company car. The latest changes take effect from 1st September 2025.

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What’s changed?

The key updates include:

A new split advisory electric rate: 8p per mile for home charging and 14p per mile for public charging (previously a single 7p rate)

A 1p increase for diesel vehicles up to 1,600cc (from 11p to 12p)

A 1p increase for diesel vehicles over 2,000cc (from 17p to 18p)

No change to petrol or LPG rates

Advisory fuel rates from 1st September 2025

Fuel type	Engine size	Rate per mile (previous)
Electric	Home charging	8p (7p)
	Public charging	14p (7p)
Petrol	1400cc or less	12p (12p)
	1401cc to 2000cc	14p (14p)
	Over 2000cc	22p (22p)
LPG	1400cc or less	11p (11p)
	1401cc to 2000cc	13p (13p)
	Over 2000cc	21p (21p)
Diesel	Up to 1600cc	12p (11p)
	1601cc to 2000cc	13p (13p)
	Over 2000cc	18p (17p)

HMRC now provides separate advisory electric rates (AERs) for home and public charging. Hybrids are treated as petrol or diesel for AFR purposes.

What’s new for electric vehicles

The most significant change this quarter is the introduction of two separate rates for electric vehicles. Until now, HMRC applied a single figure of 7p per mile for all charging, regardless of where it took place. From 1st September 2025, the rate is 8p per mile for home charging and 14p per mile for public charging. This reflects the higher costs associated with public charging infrastructure compared with charging at home.

The update provides greater accuracy when reimbursing employees and encourages businesses to consider the charging mix available to their drivers. It also represents a shift in HMRC policy, acknowledging that electric vehicles are now a mainstream part of company fleets rather than a niche exception.

Why the changes matter

These quarterly adjustments can make a difference for both employers and employees:

Using the correct rates helps avoid creating a taxable benefit or other HMRC issues

Staff are more likely to feel properly reimbursed if rates reflect real-world costs

Aligning expense policies to HMRC guidance supports clearer budgeting

The split AER recognises different charging costs and supports better policy decisions

When to apply the new rates

Apply the new rates from 1st September 2025. You may continue to use the previous rates until 30th September 2025 if needed. From 1st October 2025, only the new rates should be applied. HMRC reviews rates quarterly on 1st March, 1st June, 1st September and 1st December.

How Gravita can help

Whether you are managing a fleet of company cars, reimbursing employees for business mileage, or considering a move towards electric vehicles, our specialists can help you stay compliant and make informed decisions.

If you would like advice tailored to your business, contact Gravita today.

Future rate reviews

HMRC reviews these rates every quarter, on 1st March, 1st June, 1st September, and 1st December. While this quarter’s adjustments were minor, businesses should remain aware of potential future fluctuations, particularly given ongoing fuel price volatility.

If you have any questions about how these rates affect your business, get in touch with our team at Gravita. We can help you ensure your fuel reimbursement policies remain compliant and cost-effective.