When advising the Advisory Fuel Rates in the future, it is actually necessary to consider two things: The Advisory Electricity Rate and The Advisory Fuel Rates

The Advisory Electricity Rate (AER)

This was first announced in the August 2018 Employer Bulletin with the announcement that it would be published alongside the Advisory Fuel Rates and be kept under review.  There are some important points that are worth repeating:

  • Electricity is still not regarded as a fuel for tax and National Insurance Contributions (NICs) purposes, e.g. car fuel benefit. Therefore, it is applicable for reimbursement of business mileage in a company car
  • The AER started as 4p per mile for the quarter starting 01 September 2018
  • The AER should really be considered a concession by HMRC. The Bulletin says that ‘HMRC will accept’ that 4p per mile in a fully electric company car is a rate that does not constitute any profit element for tax and Class 1 NICs
  • Employers can pay at a higher rate if they can justify that the electricity cost per mile is more than 4p. If they cannot, the excess over 4p is profit and subject to tax and Class 1 NICs

As this rate will be kept under review, I am continuing with the following table that will form a history of this rate over time:

Advisory Electricity Rate Date Rate
Fully electric company cars From 1/09/18 4p
From 01/12/18 4p


Supporting Guidance

The above information is contained on the Gov.UK Website within the document ‘Advisory Fuel Rates’.

The Advisory Fuel Rates (AFRs)

HMRC’s Advisory Fuel Rates (AFR) can be used by employers in two situations, both applying where the employee has a company car:

  1. To reimburse employees for business travel, or
  2. To calculate the amount employees should repay where they are required to repay the cost of fuel used for private travel

The AFRs are reviewed quarterly at the start of March, June, September and December.  When new rates are announced, employers can choose to implement the new rates immediately or use the old rate for up to one further month.  The pence per mile rates effective 01 December 2018 are shown in the tables below.  This also shows the movement of rates in the last 12 months and highlights in red the changes from the rates that applied from September 2018:

Petrol and LPG
Fuel Date Engine Size
1400cc or less 1401 to 2000cc Over 2000cc

Petrol and  petrol-hybrid


From 1/12/17 11p 14p 21p
From 1/03/18 11p 14p 22p
From 1/06/18 11p 14p 22p
From 1/09/18 12p 15p 22p
From 1/12/18 12p 15p 22p



From 1/12/17 7p 9p 14p
From 1/03/18 7p 8p 13p
From 1/06/18 7p 9p 14p
From 1/09/18 7p 9p 13p
From 1/12/18 8p 10p 15p


  Date Engine Size
1600cc or less 1601 to 2000cc Over 2000cc



From 1/12/17 9p 11p 13p
From 1/03/18 9p 11p 13p
From 1/06/18 10p 11p 13p
From 1/09/18 10p 12p 13p
From 1/12/18 10p 12p 14p


Supporting Guidance

HMRC documents the way that the AFRs rates are calculated.

They are based on ‘Applied Miles per Gallon’ for different engine sizes.  This is a figure based on manufacturers’ miles per gallon information, reduced by 15% to take into account real driving conditions and lower fuel economy for older cars.  The LPG miles per gallon information is assumed to be 20% lower than for petrol due to ‘lower volumetric energy density’.

Having identified the Applied Miles per Gallon figure, they are then compared to the latest petrol and diesel fuel prices from the Department for Business, Energy & Industrial Strategy (BEIS) and the LPG (UK Average) fuel price from the Automobile Association (AA).  The fuel prices used are:

  • Petrol – 127.70p per litre (580.40p per gallon)
  • LPG – 68.00p per litre (309.10p per gallon)
  • Diesel – 136.40p per litre (620.10p per gallon)

The above information is contained on the Gov.UK Website in four separate places:

  • ‘Current rates’
  • ‘When you can use AFRs’
  • ‘How AFR rates are calculated’
  • ‘Previous rates’


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