HMRC Advisory Fuel Rates for Company Cars (Updated 2025)

Advisory fuel rates Company Car Drivers

This article is up to date as of 20th November 2025. HMRC has released the latest Advisory Fuel Rates (AFR’s) for company cars, effective from 20th November 2025. These rates are crucial for employers and employees to ensure accurate reimbursement for business travel and optimising saving tax.

Where an employee has undertaken business travel. Reimbursement payments made to an employee will not be subject to tax provided that HMRC advisory rates below are used.

Petrol, Diesel, and LPG Rates

The updated AFRs, applicable from 1 September 2025, are as follows:

Engine Size	Petrol	Diesel	LPG
1400cc or less	12p	–	11.0p
1600cc or less	–	11.6p	–
1401cc to 2000cc	14.3p	–	13.1p
1601cc to 2000cc	–	13.1p	–
Over 2000cc	22.5p	17.7p	20.6p

Note: The previous rates will no longer be valid one month after the revised fuel rates were published on 1 September 2025.

HMRC Advisory Fuel Rates for Electric and Hybrid Vehicles

• Fully Electric Vehicles: The AFR remains at 7p per mile.
• Hybrid Vehicles: Use the appropriate petrol or diesel rate based on the engine type.

Tax Free Reimbursement for Business Journeys

Employers can reimburse employees for business travel using these AFRs without the amounts being taxable on the employee. If the employer does not pay for any fuel, these rates can be used for business journeys. For private travel, employees should repay the cost of fuel used, calculated using these rates.

Reclaiming Input VAT on Fuel

Employers can reclaim input VAT on the fuel element of mileage payments. Within the 45p/25p Advisory Mileage Allowance Payment (AMAP) rates for employees using their own cars, the fuel element corresponds to the AFRs above. To reclaim VAT, the claim must be supported by a VAT receipt from the fuel supplier

Worked Example Claiming VAT on Fuel

For a 2500cc petrol-engine car reimbursed at 22p per mile, 3.67p (4 pence rounded) per mile can be reclaimed as input VAT (23p x 1/6).

Employees Using Their Own Cars for Business

For employees using their personal vehicles for business purposes:

• First 10,000 business miles: 45p per mile
• Over 10,000 business miles: 25p per mile
• Additional passengers: 5p per mile per passenger

Note: For National Insurance purposes, employers can continue to reimburse at the 45p rate regardless of mileage

Have a Question Regarding Mileage Claims

If you have questions about company car mileage rates or need guidance on reimbursements and VAT claims, feel free to reach out to our team for personalized advice.

We specialise in helping first-year start-ups and existing businesses. So whether you’re just starting out or been around the block a few times, using our expert knowledge and support, we will ensure that you and your business are heading in the right direction.

Based in Manchester, we handle all aspects of limited companies through to sole traders. We provide a personalised service and offer a fixed fee service.

This article is based on the latest information available as of 1 September 2025. For current rates and guidelines, please refer to the official HMRC.