Car Allowances: Electric Vehicles

(asked on 10th October 2022) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, in the context of the rising cost of electricity, if he will make it his policy to increase the HMRC advisory electricity rate for electric car business mileage.


Answered by
Felicity Buchan Portrait
Felicity Buchan
Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)
This question was answered on 17th October 2022

The Government introduced the Advisory Electric Rate (AER) in 2018. It applies to employees who use a fully electric vehicle as a company car.

The Advisory Electric Rate (AER) was changed in December 2021 from 4 pence per mile (ppm) to 5ppm. This was calculated using published consumption rates, adjusted to reflect real driving conditions, and the average cost of electricity.

However, employers are not required to use the AER. Instead, they can use different rates to reflect their employees’ circumstances. Provided they can show that the bespoke rates do not result in a profit for the employee, there will be no tax to pay. Otherwise, when employers reimburse employees at a higher rate than the published AER (5ppm), the excess is subject to Income Tax and NICs.

The Government keeps this policy under review.

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