Fuel costs play a significant role in business travel expenses, especially for employees using company cars.
The HMRC advisory fuel rates provide a standardised guideline for reimbursing business travel expenses and determining fuel repayment for private use. These rates are updated quarterly based on fuel price fluctuations and efficiency calculations.
With the latest updates for March 2025, businesses and employees need to stay informed about these changes to ensure accurate reimbursements and compliance with tax regulations.
What Are the Fuels Available in the UK?
The UK market offers several fuel options for company and private vehicles:
- Petrol: The most common fuel type, widely available across the UK.
- Diesel: Preferred for high-mileage driving and commercial vehicles.
- LPG (Liquefied Petroleum Gas): A cost-effective and eco-friendly alternative.
- Electric Vehicles (EVs): Growing in popularity due to government incentives.
- Hybrid Vehicles: Combining petrol/diesel with an electric motor for better fuel efficiency.
HMRC advisory fuel rates apply to petrol, diesel, LPG, and electric vehicles, while hybrid vehicles are classified under petrol or diesel categories.
HMRC Fuel Rates 2025
When Can You Use Mileage Rates?
Mileage rates apply only to employees using a company car. These rates should be used in the following circumstances:
- Reimbursing employees for business travel in company cars.
- Employees repaying the cost of fuel used for private travel.
Employers must not use these rates in any other situation.
Reimbursement for Business Travel
- If an employer reimburses employees at or below the advisory fuel rates, there is no taxable profit or Class 1A National Insurance liability.
- If a company car is more fuel-efficient or actual travel costs are higher, businesses can set their own reimbursement rates.
- Paying above the advisory rates without justification may result in taxable profit and National Insurance earnings.
Employees Repaying Private Travel Costs
- Employees must fully reimburse employers for private fuel usage to avoid a fuel benefit charge.
- If an employee repays at a lower mileage rate, they must prove that they cover the full private fuel cost.
How Are Advisory Fuel Rates Determined by HMRC?
HMRC reviews and updates fuel rates quarterly based on:
- Fuel efficiency data from manufacturers.
- Annual sales to businesses (Fleet Audits from 2021–2023).
- Petrol and diesel prices from the Department for Energy Security and Net Zero (DESNZ).
- LPG prices from the Automobile Association (AA).
- Electricity prices from ONS and DfT.
Quarterly Review Schedule
HMRC updates advisory fuel rates four times a year:
- 1st March
- 1st June
- 1st September
- 1st December
Fuel rates are rounded to the nearest whole penny based on calculated values.
What Are the Latest Petrol and Diesel Fuel Rates for 2025?
Petrol Rates
| Engine Size (cc) | Mean MPG | Fuel Price (per litre) | Rate per Mile | Advisory Fuel Rate | |
| Up to 1400cc | 51.0 | 138.7p | 12.4p | 12p | |
| 1401–2000cc | 42.3 | 138.7p | 14.9p | 15p | |
| Over 2000cc | 27.1 | 138.7p | 23.3p | 23p |
Diesel Rates
| Engine Size (cc) | Mean MPG | Fuel Price (per litre) | Rate per Mile | Advisory Fuel Rate |
| Up to 1600cc | 56.9 | 146.1p | 11.7p | 12p |
| 1601–2000cc | 49.3 | 146.1p | 13.5p | 13p |
| Over 2000cc | 38.0 | 146.1p | 17.5p | 17p |
How Do HMRC Advisory Fuel Rates Affect Company Car Users?
Employees using company cars for business travel can claim reimbursement based on HMRC’s advisory fuel rates.
These rates are designed to cover the cost of fuel used for business purposes while ensuring tax compliance.
- If an employer reimburses employees at or below the advisory fuel rates, there are no additional tax liabilities or Class 1A National Insurance contributions to pay.
- If an employer reimburses above the advisory fuel rates without clear justification (e.g., higher actual fuel costs), the excess amount will be treated as a taxable benefit, increasing both employee and employer tax obligations.
- Employees using company fuel for private travel must repay fuel costs at or above advisory rates to avoid a fuel benefit tax charge. If the repayment amount is lower than the advisory rate, the difference may be considered a taxable benefit.
By following the HMRC advisory fuel rates, both employers and employees can manage fuel expenses efficiently while ensuring compliance with tax regulations.
What Are the Fuel Reimbursement Rates for Business Mileage?
Advisory fuel rates set by HMRC help employers reimburse business mileage accurately without creating a taxable benefit.
Companies can use these rates to determine how much they should pay employees for fuel expenses incurred during business travel.
However, businesses may set their own reimbursement rates if they can demonstrate that their actual fuel costs exceed HMRC’s rates (e.g., due to fuel efficiency variations or fluctuating fuel prices).
The current fuel reimbursement rates for March 2025 are as follows:
| Engine Size | Petrol (pence/mile) | Diesel (pence/mile) | LPG (pence/mile) |
| Up to 1400cc | 12p | – | 11p |
| 1401–2000cc | 15p | 13p | 13p |
| Over 2000cc | 23p | 17p | 21p |
Employers and employees should use these fixed rates when claiming fuel reimbursements to ensure compliance with HMRC guidelines and avoid unnecessary tax implications.
How Does HMRC Calculate Electric Vehicle (EV) Advisory Rates?
With the increasing shift towards electric vehicles (EVs), HMRC provides an Advisory Electric Rate (AER) for employees using fully electric company cars. This allows businesses to reimburse electricity costs for business-related travel.
For March 2025, the Advisory Electric Rate (AER) is set at 7 pence per mile.
How HMRC Determines EV Advisory Rates?
HMRC calculates EV reimbursement rates based on:
- Energy consumption rates per mile for electric vehicles, sourced from the Department for Transport (DfT).
- Electricity price data from the Office for National Statistics (ONS) and the Department for Energy Security and Net Zero (DESNZ).
- Car efficiency statistics, using an average of business vehicle sales from the last three years.
Hybrid Vehicles
Hybrid vehicles (both plug-in hybrid and self-charging hybrid) are not included under EV rates. Instead, they are classified under petrol or diesel rates depending on their primary fuel type.
How Often Does HMRC Update Fuel Rates?
HMRC reviews and updates advisory fuel rates every three months to reflect changes in fuel prices and vehicle fuel efficiency. This ensures that fuel reimbursement remains fair and accurate.
The review schedule is as follows:
- 1 March
- 1 June
- 1 September
- 1 December
These quarterly updates take into account:
- Petrol and diesel prices from the Department for Energy Security and Net Zero (DESNZ).
- LPG prices from the Automobile Association (AA).
- Electricity costs per kilowatt-hour from ONS and DfT.
- Fuel efficiency data from manufacturer reports and Fleet Audits.
Employers and employees should stay updated with HMRC’s latest fuel rate announcements to ensure correct reimbursement and tax compliance.
What Are the Tax Implications of HMRC Fuel Rates?
The tax treatment of fuel reimbursement depends on whether an employer pays above or below the advisory fuel rates.
Employers Paying Above Advisory Rates
If an employer reimburses above HMRC’s advisory fuel rates but cannot provide evidence of higher actual fuel costs, the excess amount will be treated as:
- Taxable profit for the employee.
- Earnings subject to Class 1 National Insurance contributions.
Employees Repaying Private Fuel Costs
If an employee uses company fuel for personal travel, they must fully reimburse the employer at or above advisory rates. Failure to do so will result in a fuel benefit charge, increasing their tax liability.
Businesses must ensure they:
- Keep accurate fuel usage records to avoid tax penalties.
- Use advisory rates correctly to prevent unnecessary tax burdens.
How Can Businesses and Employees Benefit from HMRC Fuel Allowance?
For Businesses
- Accurate fuel tracking: Using HMRC’s advisory fuel rates helps businesses monitor and control fuel expenses efficiently.
- Tax compliance: Reimbursing at or below HMRC rates ensures no additional tax liabilities.
- Encouraging fuel-efficient cars: Opting for hybrid or electric vehicles can reduce costs and increase tax benefits.
For Employees
- Correct mileage claims: Employees can claim reimbursement at standard rates, ensuring fair compensation for business travel.
- Avoiding tax liabilities: Repaying private fuel use at the correct rate prevents fuel benefit tax charges.
- Optimising company car usage: Employees can maximise their fuel allowance by choosing more efficient driving habits.
Both businesses and employees should stay updated on HMRC’s quarterly rate changes to ensure fair and compliant fuel reimbursements.
Conclusion
HMRC’s advisory fuel rates for 2025 are designed to help businesses and employees accurately reimburse and claim fuel costs for company cars.
Employers must ensure they follow these rates correctly to avoid unnecessary tax implications, while employees using company fuel should repay private mileage expenses accordingly.
Staying informed about quarterly updates can help businesses manage costs effectively, promote fuel efficiency, and stay compliant with HMRC regulations.
FAQs
Can I use HMRC advisory fuel rates for personal car mileage?
No, HMRC advisory fuel rates only apply to company cars. For personal vehicles, businesses should use Approved Mileage Allowance Payments (AMAPs) instead.
Do hybrid cars have a separate advisory fuel rate?
No, hybrid cars are classified under petrol or diesel rates depending on their primary fuel type. There is no separate advisory rate for hybrid vehicles.
What happens if an employee does not repay private fuel costs?
If an employee fails to repay private fuel usage, they may face a fuel benefit tax charge, increasing their taxable income. Employers must ensure proper records.
Can I still use old advisory fuel rates after new ones are published?
Yes, you can use the previous rates for up to one month after new rates are released. However, it’s best to switch to the latest rates as soon as possible.
Are HMRC fuel rates the same for all businesses?
Yes, HMRC sets standardised fuel rates for all businesses in the UK. However, companies can set higher rates if they can prove actual fuel costs exceed HMRC’s rates.
Do advisory fuel rates apply to leased company cars?
Yes, advisory fuel rates apply to both owned and leased company cars, provided they are used for business purposes.
How can businesses ensure accurate fuel reimbursement?
Businesses should keep detailed mileage logs, ensure employees submit receipts, and use HMRC’s latest advisory fuel rates for proper reimbursement.