HMRC has released the updated advisory fuel rates that apply from 1st June 2025. These rates are used when reimbursing employees for fuel used on business journeys in company cars.

If the employer doesn’t pay for any fuel, these rates can be used to reimburse employees without triggering a taxable benefit.

You can continue to use the previous rates for up to one month after the new rates come into effect. For hybrid cars, you must use the petrol or diesel rate. For fully electric vehicle, the rate is 7p (7p) per mile.

The previous rate is shown in brackets.

Employees using their own cars

If employees use their own vehicles for business travel (not a company car), the Advisory Mileage Allowance Payment (AMAP) still applies:

• 45p per mile for the first 10,000 miles each tax year
• Then 25p per mile after that
• You can also reimburse 5p per mile for each additional passenger

For National Insurance purposes, employers can keep using the 45p rate, as the 10,000-mile threshold doesn’t apply to NIC calculations.

Reclaiming VAT on mileage payments

Part of the mileage rate covers fuel, and employers may be able to reclaim VAT on this fuel element. To do this, the employee must provide a VAT receipt from a filling station.

For example, on a 2500cc petrol car, the fuel element is 23p per mile, so 3.83p per mile (that’s 1/6th of 20/120 of the fuel cost) can be claimed as input VAT.

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