From June 1, 2025, the UK’s HM Revenue and Customs (HMRC) will implement revised advisory fuel rates (AFRs), a technical adjustment that could influence how companies handle reimbursements for employee travel in company cars running on petrol, diesel, LPG, or electricity.
While the change is part of HMRC’s regular quarterly review process, it arrives amid broader discussions around fiscal policy, including ongoing concerns about state pension payment gaps and the historic mismanagement of Home Responsibilities Protection (HRP).
According to GB News, the update does not reveal much beyond minor rate shifts, but it may still affect expense policies across a range of businesses.
Revised Petrol Rates Reflect Small Efficiency Adjustments
The updated AFRs include minor reductions for petrol vehicles, reflecting changes in average fuel costs and consumption. For cars with engines between 1,401cc and 2,000cc, the rate will decrease from 15p to 14p per mile. For larger engines over 2,000cc, the rate drops from 23p to 22p per mile. Smaller petrol engines, up to 1,400cc, remain at 12p per mile, unchanged from the previous quarter.
These rates are calculated using an average petrol price of 133.2p per litre, based on current market conditions and typical vehicle efficiency across engine sizes.
Diesel Vehicle Rates See Selective Changes
For diesel vehicles, HMRC is reducing the reimbursement rate only for smaller engines. Cars with engines up to 1,600cc will now be reimbursed at 11p per mile, down from 12p. Vehicles between 1,601cc and 2,000cc maintain a rate of 13p per mile, while those over 2,000cc remain unchanged at 17p per mile.
These values are derived from a benchmark diesel price of 140.1p per litre, with fuel consumption varying according to engine capacity.
No Change for Lpg and Electric Vehicle Rates
Rates for vehicles powered by liquefied petroleum gas (LPG) remain consistent with previous guidance. The AFR for LPG vehicles is:
- Up to 1,400cc: 11p per mile
- 1,401cc to 2,000cc: 13p per mile
- Over 2,000cc: 21p per mile
Similarly, for fully electric vehicles, the advisory electricity rate stays fixed at 7p per mile. This is based on an assumed electric efficiency of 3.57 miles per kilowatt hour and a domestic electricity cost of 25.64p per kilowatt hour.
Hybrids and Advisory Usage Rules
Hybrid cars continue to be treated as either petrol or diesel vehicles, depending on their primary engine type. HMRC has reiterated that these advisory fuel rates are strictly for use in company car reimbursements, either when an employer is covering business mileage or when an employee is repaying fuel used for private travel.
HMRC clarifies that if the mileage rate paid to employees does not exceed the advisory rates for the specific fuel type and engine size, there is no taxable profit and no Class 1A National Insurance to pay. This helps businesses simplify expense claims while remaining compliant with tax rules.
In cases where a company uses more fuel-efficient vehicles or incurs travel costs that exceed the advisory rate, a bespoke rate may be applied if it better reflects actual costs.
