Ofgem Price Cap Q4 2025: Impact on UK EV Fleets

When Ofgem announced a 2% rise in the UK energy price cap for October–December 2025, many households shrugged it off as a minor change.

But for UK SME fleet managers, that “small” increase translates directly into higher charging costs — and, critically, a growing mismatch between per-kWh energy costs and HMRC’s flat 8p per-mile reimbursement rate.

The result? Drivers of some EVs (especially vans) are effectively being under-reimbursed by hundreds of pounds per year, with real implications for fleet TCO, HR relations, and policy design.

Understanding the Ofgem energy price cap

The Ofgem price cap limits the unit rate (p/kWh) and standing charge suppliers can charge customers on default tariffs. For Q4 2025:

• Typical household annualised bill (dual fuel, direct debit): £1,755
• Electricity: 26.35p/kWh
• Gas: 6.29p/kWh

That’s up from 25.9p/kWh in Q3 — a 2% rise. Small in theory, but significant when multiplied across tens of thousands of fleet miles.

HMRC Advisory Electricity Rate (AER)

For Q4 2025, HMRC’s Advisory Electricity Rate (AER) remains fixed at 8p/mile.

• Employers reimbursing at 8p/mile stay compliant and avoid tax/NI complications.
• Drivers don’t need to track invoices.
• Payroll remains simple.

But the flat rate ignores real-world differences in vehicle efficiency, seasonal loads, and energy price volatility.

Q3 vs Q4: car vs van cost comparison

Here’s how the Ofgem rise plays out for two fleet staples:

<table>

<thead>

<tr>

<th>Vehicle</th>

<th>Efficiency (mi/kWh)</th>

<th>Cost/mile Q3 2025 (25.9p)</th>

<th>Cost/mile Q4 2025 (26.35p)</th>

<th>HMRC AER</th>

<th>Gap Q4</th>

</tr>

</thead>

<tbody>

<tr>

<td>MG4 EV (car)</td>

<td>~3.6</td>

<td>7.2p</td>

<td>7.3p</td>

<td>8p</td>

<td>within AER</td>

</tr>

<tr>

<td>Vivaro-e (van)</td>

<td>~2.5</td>

<td>10.4p</td>

<td>10.5p</td>

<td>8p</td>

<td>−2.5p vs AER</td>

</tr>

</tbody>

</table>

👉 The MG4 EV just squeezes under the HMRC allowance.

👉 The Vivaro-e leaves drivers £300 short per 12,000 miles.

Why this matters

• Seasonality: Winter heating and charging losses push real costs higher, widening the gap.
• Driver relations: Under-reimbursement creates dissatisfaction and attrition risk.
• Policy misalignment: UK’s flat AER contrasts with EU markets (e.g. Germany) that reimburse per kWh.
• Lease economics: Higher real running costs feed into residual value and TCO models.

EVDecisionCompass takeaways

1. 2% is not trivial. Scaled across annual mileage, it’s strategic.
2. Fleet mix matters. Car-heavy fleets are safer; van-heavy fleets face exposure.
3. Reimbursement policy is strategic. HMRC-only simplicity vs hybrid/fair cost.
4. Audits are essential. Tracking p/kWh alongside p/mile avoids 6–12 month model drift.

What fleet managers should do now

• Audit composition: Cars vs vans, seasonal exposure.
• Dual-model costs: Compare HMRC 8p/mile vs Ofgem p/kWh.
• Quantify exposure: What % of your fleet is under-reimbursed?
• Engage HR/Finance: Discuss hybrid or top-up models early.
• Look ahead: Q1 2026 forecasts suggest volatility, not stability.

A 2% Ofgem rise is no headline grabber. Yet for UK SME fleets, it can mean the difference between drivers fairly reimbursed or drivers £300 out of pocket.

Fleet managers face a choice:

• Stick with HMRC simplicity and accept the risks,
• Or adapt policies to reflect real per-kWh costs and protect both budgets and employee trust.

At EVDecisionCompass, we monitor these shifts quarter by quarter. With tools like Audit Express, we give fleets a data-driven view of the real cost of electrification.

👉 Don’t wait until drivers push back. Book an Audit Express this quarter and see where your fleet stands.