Mileage EV scheme: why fleets need clarity on HMRC’s split-level rates

Fleets are finding it tough to grasp the Government’s new split-level Advisory Electric Rates (AERs), which came into play in September to differentiate between the lower cost of home charging and the higher expense of public charging.

The goal was to update how company car drivers using electric vehicles get reimbursed. However, many fleets report that the system has led to confusion, inconsistent results for drivers, and additional administrative burdens, especially since EV running costs already differ greatly.

HMRC’s new setup has set the latest Advisory Electricity Rate (AER) at 7 pence per mile for vehicles charged at home and 14 pence per mile when using public rapid chargers (see Latest Advisory Fuel Rates from 01 December 2025). This seems like a fairer system.

According to Zapmap’s latest Price Index, the average cost on the public rapid network is 76p per kilowatt-hour, which translates to roughly 23p per mile for a typical electric vehicle. Charging at home, however, is still much cheaper, with the domestic price cap at 26p per kilowatt-hour and many off-peak EV tariffs dropping to around 7-8p per kilowatt-hour. For drivers who mostly charge at home, 7 pence per mile is pretty much in line with actual costs.

Making the two-tier payment system work is causing issues

The implementation, however, is proving difficult. Guidance from HMRC says that if a driver charges at both home and public locations, fleets can “apportion” the mileage based on where the energy was taken. The Association of Fleet Professionals (AFP) says this is too vague for real-world use. Systems would need to track, code or estimate how much energy came from each source, and fleet managers fear getting the method wrong could expose them to tax back-payments and penalties. As a result, many businesses are avoiding the risk and sticking to the lower rate for all journeys.

This situation is creating immediate fairness issues; drivers who rely heavily on public charging, often urban and high-mileage users, are left out of pocket, even though HMRC has acknowledged that public charging is significantly more expensive.

AFP Chair Paul Hollick says the situation has left fleets “in limbo” and has made it harder for companies to confidently reimburse employees without taking compliance risks. Fleet managers also face the challenge of explaining to drivers why the headline 14ppm rate cannot always be used.

Split rates cause internal admin issues

The issue isn’t just about money, the hassle of splitting mileage is quite a burden too. Lorna McAtear, the Deputy Chair of AFP, points out that changing internal reimbursement systems to track energy sources is both expensive and impractical for many companies. Thankfully, a simpler solution is gaining traction, backed by several fleet organisations.

In this model, drivers would fill out a form indicating whether they have a home charger. If they do, they’d get reimbursed at the new 7p per mile rate. If not, they’d receive 14p per mile for all business travel. Employers who wish to be more generous can add to these rates if they like. This approach offers a clearer system that reflects the driver’s real charging situation and eases the administrative workload.

Even with the initial hiccups, the industry’s response isn’t entirely negative, for many drivers, particularly those with off-peak home tariffs, the 7ppm rate can still fairly represent real-world charging costs. The move towards split-level rates shows that HMRC understands that EV running costs can vary significantly depending on where drivers charge.

The real hurdle now is getting the system to function smoothly.

AFP says it is collecting data from fleets all over the industry to show HMRC how the split-level rules are being applied and where things need to be clearer. This process may take a while, but businesses are eager for clearer guidance so they can reimburse drivers fairly without wasting time or risking non-compliance. Until then, many fleets find it safest to stick with the single, lower rate, even if it means some drivers end up covering business travel expenses themselves.

Photo by Peter Muniz on Unsplash.