Question to the HM Treasury:

To ask His Majesty's Government what plans they have, if any, to raise the mileage rate allowance for electric vehicles, specified by HMRC in relation to vehicle usage for work purposes, to bring it into line with that specified for petrol and diesel vehicles.

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 AER was raised in December 2022 from 5 pence per mile (ppm) to 8ppm and is currently reviewed on a quarterly basis. The revised value of the AER was calculated using the quarterly index for domestic electricity published by the Office for National Statistics and the average electrical energy consumption values for each car model, provided by the Department for Transport.

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 (8ppm), the excess is subject to Income Tax and National Insurance contributions.