HMRC has cut the Advisory Electric Rate (AER) for fully electric cars by 1ppm as it also announces new Advisory Fuel Rates (AFRs) for the upcoming quarter.

The AER falls to 8ppm from 1 June 2024

The rates are HMRC’s recommended amounts to reimburse employees for business travel in their company cars. Employers can pay higher rates where employee costs exceed them but must prove this is necessary to avoid the excess being subject to tax.

For fully electric cars, the AER now falls to 8ppm from 1 June 2024 – down from 9ppm, which had in turn been cut from 10ppm on 1 December.

The latest cut is likely to prompt renewed concerns that the AER is not fit for purpose and leaves some drivers out of pocket.

First launched in 2018 at 4ppm, the AER had risen to 5p in December 2022 and 8p on 1 March 2023 and was boosted to 10ppm from 1 September. It’s based on electrical price data from the Department for Energy Security and Net Zero, Office for National Statistics (ONS), car electrical consumption rates from the Department for Transport (DfT) and annual car sales volumes to businesses (using a Fleet Audits average for the last three years).

The DESNZ annually published “pence per kilowatt hour” cost is uprated by the quarterly ONS Consumer Prices Index for electricity to account for quarterly price variations. The value of the annual equivalent rate is then calculated by taking the cost of electricity per mile for each model provided by the DfT and electricity price data from DESNZ and ONS. Based on company car sales data across the last 3 years, a weighted average value of the electrical costs per mile for a fully electric car is then calculated.

The fall in the AER comes as most Advisory Fuel Rates rise. Petrol rates for smaller and midsized-engine cars go up by 1ppm while cars with engines over 2,000cc go up 2ppm to 26p. Diesel rates all go up by 1ppm. LPG rates stay the same.

The new AFR tables from 1 June 2024 are as follows (old rates in brackets):

Advisory Electric Rate

From 1 June 2024, the Advisory Electric Rate for fully electric cars will be 8 pence per mile.

Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates.

The full list of rates can be viewed here, along with the tables for calculating them.