Executive summary
From 1 June 2026, HMRC’s current split Advisory Electricity Rate for fully electric company cars is:
- 7 pence per mile for home charging (was 8p, Sept–Nov 2025)
- 15 pence per mile for public charging (was 14p, Sept 2025-May 2026)
The split was introduced on 1 September 2025 at 8p/14p, then moved to 7p/14p from 1 December 2025 before the public rate increased to 15p from 1 June 2026.
The intention is simple – to reflect the real cost gap between domestic and public charging. In practice, it has created a more complex reimbursement landscape, with:
- fleets unsure how to apply the split in day-to-day mileage claims
- drivers aware of the 15p public rate but unsure when they are entitled to it
- finance teams worried about HMRC exposure if they “get it wrong”
This guide explains what HMRC’s split AER actually requires, the main compliance risks, the practical methods UK fleets are using today, and the controls you need to be audit-ready – without over-paying or under-paying your drivers. It also shows where EV Decision Compass fits, with a 72-hour AER Compliance Pack for fleets that want a structured, HMRC-aligned solution.
1. What HMRC’s split AER actually requires
HMRC’s Advisory Electricity Rate is the pence-per-mile benchmark used when:
- reimbursing employees for business mileage in an electric company car, or
- asking employees to repay the employer for private mileage in a company EV.
From September 2025 onwards, HMRC expects UK employers to:
Apply the correct rate based on where electricity is purchased
- Home charging → 7p per mile
- Public charging → 15p per mile
In other words, the rate should reflect the charging source behind the journey, not just the fact that the vehicle is electric.
Hold evidence for higher-cost (15p) mileage
HMRC’s expectation is that the 15p rate is used where drivers must rely on public charging and genuinely face higher electricity costs per mile – for example, because they have no home charger or a specific trip was powered using public charge points.
Employers should be able to demonstrate why 15p was paid, for instance via:
- driver declarations confirming there is no home charging
- receipts or logs from public charge points
- telematics or app data showing public charging sessions
Maintain a clear, documented policy
HMRC does not prescribe a single technical method to distinguish between home-charged and public-charged miles. Instead, it expects a “fair and reasonable” methodology, written down and applied consistently.
A defensible policy should explain:
- who is eligible for 7p vs 15p
- how the charging mix is determined (per driver, per trip, or via cost-based rules)
- what evidence is required for any mileage paid at the higher rate
Update rates when HMRC changes them
HMRC now reviews advisory rates quarterly (March, June, September, December). When rates change, your reimbursement policy and expense templates should be reviewed and updated accordingly.
Even where the rate does not move in a given quarter, being able to show that you checked and documented your decision is an important part of being audit-ready.
Key point: HMRC allows employers to pay above or below the AER – but any amount above the published rate must be backed by evidence of actual cost per mile. Paying more without proof can lead to the excess being taxed as a benefit.
2. Main compliance risks for UK fleets in 2026
Based on guidance from HMRC, industry commentary and fleet professional bodies, several recurring risks have emerged:
Risk 1 – Paying 15p without clear evidence
Reimbursing at 15p per mile without documentation linking those miles to public charging exposes the employer to HMRC challenge. In an audit, unsubstantiated 15p claims may be treated as a taxable benefit – with potential back taxes and penalties.
What HMRC expects:
If you pay above the home-charging rate, you should be able to prove that the driver genuinely incurred higher per-mile costs, typically via public charging receipts, logs or declarations.
Risk 2 – Defaulting to 7p and under-paying drivers
Many fleets have reacted cautiously by using 7p for all EV business miles. While this approach is “safe” from HMRC’s point of view, it can be unfair to drivers who rely heavily on public charging and face significantly higher costs.
Impact:
- drivers may feel they are effectively subsidising business travel
- morale and retention can be affected in high-mileage roles
- disputes and complaints can increase, especially as drivers become more aware of the 15p public rate
Risk 3 – Inconsistent or undocumented processes
If there is no written policy, or if the rules are applied differently across teams, it becomes very difficult to defend the approach in an HMRC review – or to explain it fairly to employees.
Typical symptoms include:
- similar drivers in similar roles being reimbursed at different rates
- case-by-case exceptions with no audit trail
- local spreadsheets that do not match central finance policy
Risk 4 – Weak or missing audit trail
In a compliance check, HMRC will expect the employer to show:
- how the rate for each claim (7p vs 15p vs any other rate) was determined
- what evidence supports any mileage reimbursed at higher rates
- how policies and rates have been updated when HMRC’s AER changed
Where records are missing, incomplete or inconsistent, employers are exposed to reclassification and back-dated tax.
Risk 5 – Out-of-date rates and policies
The AER used to be relatively static. With a quarterly review cycle and volatile energy prices, policies can fall out of date quickly.
Examples of where fleets run into trouble:
- continuing to use a single flat rate months after the split AER took effect
- failing to align internal documentation with the latest HMRC announcement
- not diarising rate review dates – or relying on manual, ad hoc checks
A simple controls framework – with ownership, reminders and a standard update process – significantly reduces this risk.
3. Practical methods UK fleets are using
Because HMRC has deliberately left room for judgement, UK fleets have adopted a small number of pragmatic approaches to apply the split rate:
Method A – Split by driver (home charger declaration)
Drivers declare whether they have access to home charging. Policy rules:
- driver has a home charger → business mileage reimbursed at 7p per mile
- driver does not have home charging → business mileage reimbursed at 15p per mile
Advantages:
- simple and cheap to administer
- broadly fair for the majority of drivers
- creates clear evidence for HMRC via signed declarations
Limitations:
- does not perfectly capture mixed charging patterns (e.g. some public use for “home charger” drivers)
Method B – Single 7p rate as a temporary workaround
Some organisations continue to use a single rate for all EV business miles, typically 7p per mile (the home rate), because their systems cannot yet support a split rate.
Advantages:
- very low HMRC risk (you cannot overpay relative to the advisory rate)
- no change required to expense or payroll systems
Limitations:
- under-compensates drivers who rely on public networks
- can cause fairness issues and HR pressure
- should be documented explicitly as a temporary workaround, not a long-term solution
Method C – Evidence-based split by trip
Under this method, drivers specify for each claim which miles were powered by home vs public charging and provide supporting evidence for the public portion (receipts, logs from charging apps, telematics data).
Advantages:
- precise alignment between reimbursement and real charging costs
- strong audit trail for 15p mileage
Limitations:
- higher administrative load for drivers and finance teams
- requires disciplined record-keeping and clear guidance to avoid errors
Method D – Hybrid approach (default 7p + controlled 15p exceptions)
A hybrid approach combines the simplicity of a default 7p rate with clearly-defined exceptions where 15p is allowed for specific drivers, trips or periods that are predominantly public-charged, backed by evidence.
Advantages:
- balances fairness for high public-charging drivers with controllable administration
- provides a structured way to handle edge cases without rewriting all systems at once
Limitations:
- requires a clear definition of when exceptions apply
- needs monitoring to prevent “exception creep”
4. AER compliance checklist (2026)
Use this checklist to assess whether your current EV mileage reimbursement process is ready for HMRC scrutiny and fair to drivers:
- ✅ Written policy in place – Clear rules on when 7p vs 15p is paid, how charging type is determined, and what evidence is required.
- ✅ Consistent rate logic – Drivers in similar situations are treated within the same framework, with documented exceptions only where justified.
- ✅ Defined method for home vs public apportionment – For example: driver declarations, expense claim flags, telematics, or a cost-based rule.
- ✅ Evidence collection for 15p mileage – Receipts, charging app logs, declarations or reports that demonstrate higher costs per mile where 15p (or a higher rate) is used.
- ✅ Quarterly review of HMRC rates – Named owner, diarised check around HMRC AER update dates, and a simple record of each review and outcome.
- ✅ Driver communication and training – Guidance explaining the policy, the 7p / 15p split, and what drivers need to do when submitting claims.
- ✅ Audit-ready record keeping – A practical way to retrieve, for any claim sample, the policy version in force, the applied rate and the supporting evidence.
- ✅ Management oversight and periodic sampling – Periodic review of claims or driver groups to make sure the policy is working as intended and remains fair.
If several of these items are missing or partially implemented, it is worth structuring a short compliance project rather than making incremental, undocumented tweaks.
5. How EV Decision Compass helps UK fleets
EV Decision Compass offers an AER Compliance Pack (72h) – a structured, time-boxed way for UK fleets to move from “we’re not sure our policy is safe” to “this is clearly documented and HMRC-aligned”.
Within 72 hours, we help fleet, finance and HR teams to:
- Design a compliant reimbursement methodology – We map your fleet profile and systems constraints to a practical method (driver declaration, evidence-based split, hybrid, or cost-based) that is fair and defensible.
- Produce policy wording and driver communication – You receive ready-to-sign policy language and driver comms that explain the 7p / 15p logic in plain English, including how claims should be submitted and what evidence is required.
- Model cost and fairness scenarios – We run scenarios to quantify how different approaches affect driver reimbursement and overall fleet cost, flagging any edge cases that may need bespoke treatment.
- Strengthen audit readiness – We provide simple templates for declarations, evidence collection and record keeping so that, if HMRC reviews your approach, you can show a clear, reasonable methodology.
The AER Compliance Pack does not replace legal or tax advice. Instead, it gives you a rigorous operational framework you can align with your advisers – and implement in days, not months.
6. Next steps and further reading
If your fleet already runs EVs in the UK – or will do so in the next 12–18 months – now is the right moment to check whether your mileage policy is aligned with the current HMRC rules.
Suggested next actions:
- Run the checklist above against your current EV mileage policy.
- Identify gaps in documentation, evidence collection and rate updates.
- Decide whether a driver-based, trip-based or hybrid approach best fits your systems and culture.
- If you need structured help, book a 72-hour AER Compliance Review.
CTA:
Secure the same 72-hour delivery slot we use on the homepage and get a formal assessment of your mileage reimbursement framework.
Further reading (EV Decision Compass blog)
Explore related analysis and policy updates on the EV Decision Compass blog:
- Why Most EV Mileage Policies Fail HMRC Tests
- HMRC fixes the new Advisory Electricity Rates
- Charging costs: home vs petrol
- UK EV charger data access obligations
Each of these posts gives additional context on AER updates, charging economics and open-data requirements that sit behind this guide.