From 1 March 2025, HMRC has set new advisory fuel rates for company cars. These rates are used to:

• Reimburse employees for private mileage in a company car
• Cover business fuel costs without creating a taxable benefit for the employee

If an employer doesn’t provide fuel for personal use, employees can be reimbursed at these rates for business mileage without tax consequences.

Previous rates shown in brackets.

• Hybrid cars: Use the petrol or diesel rate.
• Fully electric cars: The rate is 7p per mile (unchanged from the previous rate).
• You can still use the old rates for up to a month after the new ones apply.

Employees Using Their Own Cars

If employees use their own vehicle for work, they can claim a tax-free mileage reimbursement called Advisory Mileage Allowance Payment (AMAP):

• First 10,000 miles: 45p per mile (plus 5p per passenger)
• After 10,000 miles: 25p per mile

For National Insurance purposes, employers can continue reimbursing at 45p per mile, as the 10,000-mile threshold doesn’t apply.

Claiming VAT on Fuel Costs

Within the 45p/25p AMAP rates, a portion represents fuel costs. Employers can reclaim 20/120 of the fuel amount as input VAT, as long as they have a VAT invoice from the fuel station.

For example, for a 2,500cc petrol car, employers can reclaim 4p per mile in VAT (based on 23p per mile, where 1/6 is recoverable).