Reimbursing business mileage for electric cars

10th June 2019

Although electric and hybrid vehicles still represent a modest proportion of the total new car market (5.75% in 2018) their numbers are on the rise. In fact 2018 saw record numbers hit our streets with plug in hybrid electric vehicles posting a 24.9% year on year increase, followed by hybrid petrol-electric vehicles at 21.3% and battery electric vehicles up 13.8%.  Sales to date in 2019 are also strong with battery electric and hybrid petrol-electric vehicles leading the way.

Alongside this increase in the popularity of hybrid and electric vehicles we have seen a rise in queries relating both to the calculation of business mileage and the way in which the cost of charging vehicles should be apportioned. Let’s start with the simple calculation; reimbursement for business mileage. Please note for the purposes of this article we are only going to look at cars; separate rates and rules may apply for other vehicles. We are also going to set aside the option for claiming actual expenses rather than a per mile rate; if you are interested in exploring this avenue then we would be happy to discuss your options with you.

For cars owned by the employee the calculation is relatively straightforward. Employers can pay a rate of up to 45p per mile for the first 10,000 miles in a tax year and 25p per mile thereafter irrespective of the type of car used. So it doesn’t matter whether you are driving an electric, hybrid, petrol or diesel car. Reimbursements in excess of this rate will be subject to tax and national insurance.  Employees are also able to claim tax relief on any shortfall should the employer pay less than the 45p rate.

For cars owned by the employer the mileage calculation is more complex; varying according to the size of engine and type of fuel. Unlike the employee owned car rate which has remained unchanged for a number of years, company car mileage rates are reviewed quarterly with the next rate change having taken effect on 1 June 2019. When it comes to company owned electric cars the rate is currently set at 4p per mile with hybrid cars being charged according to their duel fuel type.

Then we come to the question of accounting for the cost of charging electric vehicles. This can be somewhat complex to navigate around although HMRC have issued a ‘handy’ help guide. The good news here relates to charging points provided by the company at or near an employees workplace. Subject to certain conditions being met there is no taxable benefit for making use of these charging points whether or not the vehicle is owned by the individual or the company and whether or not the electricity is to be used for private or business mileage.

When it comes to installing or making use of charging points at an employee’s home or elsewhere the rules are more complex. The simple answer however is that if all costs are covered by the individual there is no income tax liability but where costs are covered by the employer a tax liability could arise.

Thompson Jenner Partner Simon Lewis commented: “Although the rules seem complex, taking time to fully understand and explore the options relating to mileage payments and the charging of electric vehicles could result in a benefit for employees, employers and the self-employed.”


If you would like to find out more or meet to discuss the tax services which we are able to provide, please contact Simon Lewis or one of our specialist Partners on  01392 258553 or 01395 279521 to arrange a free initial meeting.



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