Advisory Fuel Rates in the UK: What Company Car Drivers Need to Know
For businesses and employees using company cars in the UK, Advisory Fuel Rates (AFRs) play an important role in reimbursing mileage and managing tax liabilities. Set by HM Revenue & Customs (HMRC), these rates provide a standardised way to calculate the cost of fuel or electricity used during business travel.
In this guide, we explain what advisory fuel rates are, when they can be used, how they apply to both internal combustion engine (ICE) vehicles and electric vehicles (EVs), and how the rates are calculated.
What Are Advisory Fuel Rates?
Advisory Fuel Rates are per-mile rates published by HMRC for employees who drive a company car. They represent the estimated cost of fuel or electricity used when driving for business purposes.
These rates help employers determine:
- How much to reimburse employees for business mileage in a company car
- How much employees should repay for private mileage if their employer pays for fuel
If employers reimburse business travel at or below the advisory rate, there is no taxable benefit or additional National Insurance to pay.
HMRC reviews these rates every quarter (typically on 1 March, 1 June, 1 September and 1 December) to reflect changes in fuel and electricity prices.
When Can Advisory Fuel Rates Be Used?
Advisory Fuel Rates only apply to company cars, not privately owned vehicles.
They can be used in two main situations:
1. Reimbursing Business Mileage
If an employee drives their company car for work purposes, an employer may reimburse them using the advisory fuel rate for that vehicle.
Provided the reimbursement does not exceed the published rate, there is no tax liability.
2. Repaying Private Fuel
If an employer pays for all fuel (for example through a fuel card), the employee can repay the cost of private mileage using the advisory rate. Doing this avoids triggering the company car fuel benefit charge, which would otherwise be taxable.
Advisory Fuel Rates for Petrol and Diesel Cars
For petrol, diesel and LPG vehicles, the advisory rate depends on:
- Fuel type
- Engine size
For example, the rates applicable from December 2025 include:
| Engine Size | Petrol | Diesel |
| Up to 1400cc (petrol) / 1600cc (diesel) | 12p per mile | 12p per mile |
| 1401cc–2000cc / 1601cc–2000cc | 14p per mile | 13p per mile |
| Over 2000cc | 22p per mile | 18p per mile |
Hybrid vehicles do not have their own rate. Instead, they are treated as either petrol or diesel vehicles depending on their engine type.
Advisory Electricity Rates for Electric Vehicles
Fully electric company cars use a separate rate called the Advisory Electricity Rate (AER).
From December 2025, HMRC introduced two rates depending on where the vehicle is charged:
| Charging Location | Rate |
| Home charging | 7p per mile |
| Public charging | 14p per mile |
Where charging occurs in multiple locations, mileage can be apportioned between the two rates using a fair and reasonable method.
How Advisory Fuel Rates Are Calculated
HMRC calculates advisory rates using several national datasets and average consumption figures.
Petrol and Diesel Vehicles
For internal combustion vehicles, HMRC considers:
- Average UK fuel prices sourced from the Department for Energy Security and Net Zero
- Typical fuel consumption data
- Engine size categories
These factors are combined to estimate the average fuel cost per mile, which is then rounded to the nearest penny.
Electric Vehicles
Calculating the electricity rate is more complex. HMRC uses:
- Electricity price data from the Department for Energy Security and Net Zero and the Office for National Statistics
- EV efficiency data from the Department for Transport
- Fleet sales data to calculate a weighted average consumption across company cars
For public charging, additional pricing data from the Zap Map Price Index is used to reflect higher charging costs outside the home.
Can Employers Use Different Rates?
Advisory fuel rates are guidelines rather than mandatory rules.
Employers may choose to use different rates if they can demonstrate that the actual cost per mile is higher or lower than the HMRC advisory figure. However, any reimbursement above the advisory rate may be treated as taxable income unless supported by evidence.
Advisory Fuel Rates vs Mileage Allowance
It is important not to confuse advisory fuel rates with Approved Mileage Allowance Payments (AMAP).
- Advisory Fuel Rates: Used for company cars
- AMAP (45p per mile): Used for privately owned vehicles used for work
The two systems exist to reflect the fact that company car drivers are not responsible for vehicle ownership costs, only fuel or electricity.
Summary
Advisory Fuel Rates provide a straightforward way for employers and employees to manage fuel reimbursements for company cars while remaining compliant with tax rules.
Key points to remember:
- AFRs apply only to company cars
- They are used for business mileage reimbursement or private fuel repayment
- Rates vary by fuel type, engine size, or charging location
- HMRC reviews them quarterly to reflect changing fuel prices
For businesses operating fleets or managing company car drivers, keeping up to date with the latest advisory fuel rates ensures reimbursements remain fair, accurate and tax-efficient.