TAX office chiefs have taken a further swipe at electric vehicles – this time creating potential admin and financial headaches for business owners.
From 1 September, the flat advisory fuel rate of 7p per mile for electric cars was scrapped in favour of a two-tier system based on where the vehicle is charged.
Drivers charging at home will now receive 8p per mile, while those using public charging stations can claim 14p – reflecting the widening cost gap between domestic and public charging.
The new rates will be reviewed quarterly, alongside petrol and diesel rates.
The change marks a shift in how HMRC views EVs from a tax perspective and adds complexity for businesses, which must now track where charging occurs to reimburse staff correctly.
Employers with staff reliant on public charging could see costs rise sharply unless they impose caps or controls.
HMRC says domestic electricity rates are calculated using data from the Department for Energy Security and Net Zero and the Office for National Statistics (ONS), while public charging rates are based on Zapmap’s monthly index, also adjusted with ONS data.
The tax authority has confirmed that companies may reimburse drivers at a higher rate if they can prove their costs exceed the advisory rates.
Victoria Thompson, Senior Accountant at JF Hornby & Co, says this is another sign that EV incentives are losing their shine: “HMRC is definitely eyeing EV owners – they’re no longer the super tax-efficient option they once were.
“This split in advisory rates reflects real-world charging costs but also signals a clear shift in how electric vehicles are treated for tax.”
The move follows other changes eroding the financial appeal of electric cars.
From April 2025, EVs will lose their Vehicle Excise Duty exemption, with most paying the standard £195 a year.
A £10 hybrid discount has also been scrapped, and Benefit-in-Kind rates for electric company cars have risen from 2% to 3%, with further hikes expected.
If you need advice on taxation linked to company vehicles, contact the team at JF Hornby & Co on 01229 5898077 or by emailing jfh@jfhornby.com
