HMRC has published its latest advisory fuel rates for company cars, which apply from 1 June 2025. These rates are used to calculate mileage reimbursements for employees using a company car for business journeys – and help ensure that those payments remain tax-free.
Here’s what’s changed and what you need to know.
Advisory Fuel Rates: Company Cars
If your business provides company cars but doesn’t pay for fuel, these are the new suggested reimbursement rates for business mileage.
| Engine Size |
Petrol |
Diesel |
LPG |
| 1400cc or less |
12p (unchanged) |
11p (unchanged) |
– |
| 1600cc or less |
– |
11p (↓ from 12p) |
– |
| 1401cc to 2000cc |
14p (↓ from 15p) |
13p (unchanged) |
– |
| 1601cc to 2000cc |
– |
13p (unchanged) |
– |
| Over 2000cc |
22p (↓ from 23p) |
17p (unchanged) |
21p (unchanged) |
Previous rates are shown in brackets. You can continue to use the old rates for up to one month from the date the new ones take effect.
Electric and Hybrid Cars
For fully electric vehicles, the reimbursement rate remains at 7p per mile.
If your company car is a hybrid, you’ll need to use the petrol or diesel rate, depending on how the car is fuelled.
Own Vehicle Use: Mileage Allowance Payments (AMAP)
If your employees use their own car for work, the tax-free mileage rate remains:
-
45p per mile for the first 10,000 business miles
-
25p per mile thereafter
-
Plus 5p per mile for each passenger also travelling for work
For National Insurance purposes, employers can continue to reimburse at 45p per mile without applying the 10,000-mile threshold.
VAT on Fuel Reimbursements
If you’re reimbursing fuel costs for company car use, you may be able to reclaim input VAT on the fuel portion. For example, if you’re reimbursing an employee at 23p per mile for a 2500cc petrol car, 3.83p per mile can be reclaimed as VAT (23p × 1/6), as long as you have a VAT receipt from the filling station.
Need Help with Mileage Policies or VAT Claims?
Mileage reimbursements might seem small, but they can add up — and getting them wrong can lead to tax headaches. If you need help putting clear policies in place or working out your VAT recovery on fuel, just get in touch.
At A&C Chartered Accountants, we make sure your business travel expenses are managed efficiently and compliantly.