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The Mileage Rates for Electric or Hybrid Cars

4 November 2020
Slava Knazevs
Reducing Tax, Payroll, People


As the government plans to ban all new non-electric cars from sale by 2035, many UK car buyers are already shifting towards electric and hybrid vehicles. But how much can you claim for mileage under the current government guidelines?

Why Should You Buy an Electric Car?

The all-electric trend shows no signs of slowing down. The choice of electric vehicles (EVs) is widening, and prices are gradually falling, giving people more choice of affordable electric cars over regular petrol or diesel vehicles. Depending on how long you plan to own your current car –– or if you’re looking to purchase a car for the first time –– it might be worth making the switch to an electric or hybrid vehicle.

Are Electric Cars Cheaper Than Petrol or Diesel Cars?

While the initial investment might be higher than that of the purchase of a petrol or diesel car, electric cars are much cheaper to run and have lower lifetime running costs in comparison to their more conventional counterparts.

You can charge your car at home with a home-charging kit so you don’t have to leave the house to refuel. Plus, there are a growing number of charging points becoming available across the UK — from motorways to shopping centres. Electric cars also produce fewer emissions than petrol or diesel vehicles, making them a lot better for the environment. Some top-level EVs are also starting to out-perform petrol and diesel cars in terms of speed, handling and comfort.

These benefits come with one small drawback: the mileage allowance you can claim for using an electric or hybrid car for business purposes.

Can You Claim Mileage for Electric Cars?

The good news is that tax-free Mileage Allowance Payments (MAPs) –– used to reimburse business mileage clocked up by employees using their own vehicles for work –– apply to all cars and vans no matter what fuel they use.

Employees with electric cars can, therefore, claim the same tax-free Approved Mileage Allowance Payments (AMAPs) as petrol or diesel cars. Some things to note:

  • Employees can claim 45p per mile for the first 10,000 business miles in the financial year, and 25p per mile thereafter.
  • Any reimbursement by the employer for business mileage is tax and NIC free provided it’s no higher than the above AMAP rates.
  • Reimbursements over the above AMAP rates are taxable on the employee and must be reported to HMRC.
  • If the employer reimburses at a rate lower than the AMAP rates, the employee can still claim tax relief from HMRC on the difference.

It’s important to note that an employee may receive a taxable benefit in connection with their personal electric car if their employer:

  • Pays for a vehicle charging point to be installed at the employee’s home.
  • Provides a charge card to allow access to commercial or local authority vehicle-charging points.
  • Pays to lease a battery for the employee’s car.

There is no benefit-in-kind charge for employees charging their own cars at a workplace charging station, as HMRC does not consider electricity to be a fuel.

What Is the Mileage Rate for Electric Cars?

If you have an electric car as a company car, the advisory electricity rate is 4p per mile. That means the company can pay the employee 4p per mile for every business mile travelled in the electric car without any tax consequences.

Conclusion: The Most Cost-Effective Cars for Your Business

It may be less expensive to run and maintain an electric car, but the initial cost is likely to be significantly greater than that of a petrol or diesel car. It could take years to make back your initial investment, but the comfort and performance of most electric cars might make up for this — not to mention the great environmental benefits.

If you or your employee wishes to use an electric vehicle for business travel, it’s important to note that the government has reduced the allowance per mile significantly to coincide with the cheaper running costs of EVs. Make sure you factor this into the overall cost of owning an electric vehicle and how much you can claim to offset these costs for your business.

Interested in other ways to save money for your business? We’re expert chartered accountants based in Kent who service small to medium-sized businesses across the UK. We help our valued clients to save money, grow their businesses and achieve their goals, so why not request a free consultation, and see how we can help you today.

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