Fuel is one of the biggest costs of operating a fleet, and His Majesty’s Revenue & Customs (HMRC) enforces a rigid process to make sure those expenses are properly accounted for.
HMRC-approved mileage rates are published every quarter and they apply to all at-work drivers, whether they’re in a company car or van or their own. With tax penalties for getting it wrong, it’s an important system to understand. Here’s what you need to know.
What are the mileage rates for company cars and vans?
If you’re driving a company-owned vehicle – that includes pooled, daily rental and company cars – on business, then you’ll be reimbursed using HMRC’s Advisory Fuel Rates (AFRs). Employers can also use these to recoup the cost of fuel you’ve used for private journeys, if you’ve got a fuel card.
Rates are reviewed every quarter to make sure they’re realistic, and they apply to any journeys made during that period. Those updates are based on average fuel efficiency figures for fleet-operated vehicles and the most recent forecourt prices, with nine different rates based on engine size and fuel type.
Petrol cars and vans
| Engine Size | Average Efficiency | Cost Per Mile | AFR |
|---|---|---|---|
| Up to 1,400cc | 50.7mpg | 14.1p | 14p |
| 1,401-2,000cc | 42.8mpg | 16.7p | 17p |
| Over 2,000cc | 27.2mpg | 26.2p | 26p |
Diesel cars and vans
| Engine Size | Average Efficiency | Cost Per Mile | AFR |
|---|---|---|---|
| Up to 1,600cc | 55.7mpg | 15.4p | 15p |
| 1,601-2,000cc | 49.6mpg | 17.3p | 17p |
| Over 2,000cc | 36.6mpg | 23.4p | 23p |
LPG cars and vans
| Engine Size | Average Efficiency | Cost Per Mile | AFR |
|---|---|---|---|
| Up to 1,400cc | 40.6mpg | 11.1p | 11p |
| 1,401-2,000cc | 34.2mpg | 13.2p | 13p |
| Over 2,000cc | 21.7mpg | 20.7p | 21p |
What are the mileage rates for electric and hybrid company cars?
Almost two thirds (62%) of drivers are in a plug-in hybrid or electric company car, according to the latest HMRC data, and the simplistic mileage rates have been a bugbear for fleet operators since they were introduced in 2018.
Electric vehicle drivers can claim at the Advisory Electric Rate (AER), which reimburses at 8p per mile for charging at home, or 14p if they use the much pricier public networks. For journeys that use a mix of both, HMRC advises calculating a “fair and reasonable” split between the two.
The AER is adjusted every quarter to account for fluctuating energy prices, but there’s only one set of rates. Unlike AFRs, this doesn’t differentiate between the efficiency of a large SUV, and a small city car.
There are no mileage rates for hybrid cars, whether they’re ‘self-charging’ or plug-in hybrids (PHEVs). Mileage claims for both are reimbursed using the AFR system, based on the size of their engine and the fuel in their tank.
Although that doesn’t specifically cover charging costs for PHEVs, drivers who regularly plug in at home or work can usually claim at a higher rate than they’d be paying for the electricity anyway.
Can fleets set their own mileage rates?
Yes. HMRC allows fleets to set their own if they don’t match real-world costs – for example, if they’re leaving drivers out of pocket, or paying over the odds.
There is a catch. Fleets need to be ready to prove that those adjustments are accurate, otherwise they risk over or underpaid expenses being seen as additional employee income or profit for the business, and both are taxable. Sticking to the advisory rates avoids that complexity.