Electric Vehicles: Electricity

Treasury written question – answered on 21st September 2022.

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Photo of Kim Leadbeater Kim Leadbeater Labour, Batley and Spen

To ask the Chancellor of the Exchequer, what assessment HMRC has made of the potential merits of increasing the Advisory Electricity Rate paid to owners of electric vehicles, in the context of rising electricity costs.

Photo of Felicity Buchan Felicity Buchan The Exchequer Secretary

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 employee’s 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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