If you run a company car or process mileage claims for employees, those few pence per mile can make a real difference to your bottom line. For December 2025, the new rates bring a notable shift for electric vehicle drivers — and a welcome period of stability for petrol and diesel users.
Effective date: 1 December 2025 ·
Date announced: 21 November 2025 ·
Petrol rate (up to 1400cc): 12p per mile ·
Diesel rate (up to 1600cc): 12p per mile ·
Electric home charge rate: 7p per mile
Quick snapshot
- HMRC published rates on 21 November 2025, effective 1 December (GOV.UK official guidance)
- Petrol and diesel rates unchanged from September 2025 (HB Accountants tax advisory firm)
- Electric home charging rate dropped from 8p to 7p per mile (GOV.UK advisory fuel rates)
- Whether any UK budget changes after March 2026 will affect future rates (Curoca tax compliance specialists)
- Exact reason for no change given stable but fluctuating fuel prices in late 2025 (Curoca tax compliance specialists)
- Electric vehicle public-charge rate of 14p per mile — sourced from Curoca tax compliance specialists but not directly confirmed on GOV.UK
- Whether the quarterly review cycle in February, May, August, and November will continue unchanged after March 2026 (HB Accountants tax advisory firm)
- Whether the September-to-December 2025 freeze in petrol and diesel rates will persist into March 2026 (HB Accountants tax advisory firm)
- 21 Nov 2025: HMRC published December 2025 rates
- 1 Dec 2025: New rates take effect
- March 2026: Next scheduled quarterly update
- Employers should update payroll systems to the December 2025 rates
- Electric vehicle drivers will see lower tax-free mileage reimbursement for home charging
- Next review expected in February 2026 for rates effective March 2026
The table below compares the December 2025 rates with the previous quarter, showing where costs held steady and where they shifted.
| Item | December 2025 rate | Previous rate (Sep 2025) |
|---|---|---|
| Effective date | 1 December 2025 | — |
| Date announced | 21 November 2025 | — |
| Source | HMRC (GOV.UK) | — |
| Petrol rate (most common cars up to 1400cc) | 12p per mile | 12p per mile |
| Diesel rate (most common cars up to 1600cc) | 12p per mile | 12p per mile |
| Electric home charge rate | 7p per mile | 8p per mile |
| Rate change from September 2025 | Petrol and diesel unchanged; EV home rate reduced by 1p | — |
What are the advisory fuel rates for December 2025?
HMRC published the December 2025 rates on 21 November 2025, effective from 1 December. The rates are set per fuel type and engine size, with separate figures for electric and LPG vehicles. Here is the full breakdown by category.
Petrol rates by engine size
- Engine up to 1400cc: 12p per mile (GOV.UK petrol rate table)
- Engine 1401cc – 2000cc: 14p per mile (GOV.UK petrol rate table)
- Engine over 2000cc: 22p per mile (GOV.UK petrol rate table)
Diesel rates by engine size
- Engine up to 1600cc: 12p per mile (GOV.UK diesel rate table)
- Engine 1601cc – 2000cc: 13p per mile (GOV.UK diesel rate table)
- Engine over 2000cc: 18p per mile (GOV.UK diesel rate table)
Electric vehicle rates
- Home charging: 7p per mile (decreased from 8p) (GOV.UK electric vehicle rate)
- Public charging: 14p per mile (Curoca tax compliance specialists)
Home-charging company car drivers lose 1p per mile compared with the September 2025 rate. On a 1,000-mile month, that is £10 less in tax-free reimbursement — a small but real hit for households that charge at home.
LPG rates
- Engine up to 1400cc: 11p per mile (Curoca LPG rate table)
- Engine 1401cc – 2000cc: 13p per mile (Curoca LPG rate table)
- Engine over 2000cc: 21p per mile (Curoca LPG rate table)
The pattern: petrol and diesel stay flat, EV home charging takes a 1p hit, and LPG rates remain unchanged from the prior quarter.
When to use advisory fuel rates?
Advisory fuel rates exist for one specific purpose: to let employers reimburse company car drivers for business mileage without creating a taxable benefit. If you pay these rates or less, there is no benefit-in-kind charge. Pay more, and the excess becomes taxable.
Company car drivers and reimbursement
- Rates apply only to company cars — not to personally owned vehicles used for business (HMRC advisory fuel rates scope)
- Employers can use the published rates as a benchmark without needing individual fuel receipts
- If the employer pays exactly the advisory rate, no benefit-in-kind arises for the employee
When employers can use the rates
- Employers must use the rates if they want tax-free reimbursement without complex record-keeping
- Rates can be used for any company car regardless of its actual fuel consumption (HB Accountants tax advisory firm)
- Quarterly updates (February, May, August, November) mean employers should update payroll systems at the start of each quarter
What to do if your car is fully electric
- Use the 7p per mile rate if the car is charged at home
- Use the 14p per mile rate if the car is charged using public chargers
- The rate is calculated using 3.59 miles per kWh electrical efficiency and 25.72p per kWh electricity cost (Curoca EV rate calculation methodology)
At 7p per mile, a driver covering 800 business miles per month receives £56 tax-free. Switch to public charging at 14p per mile, and that same driver gets £112. The gap reflects the real-world cost difference between home and public electricity tariffs.
What this means: employers need a clear policy on how drivers report their charging location to avoid mismatched reimbursements.
Can you claim VAT on advisory fuel rates?
Yes — and the rules are more straightforward than many employers assume. HMRC allows VAT recovery on the fuel element of advisory fuel rate payments, but only if you follow the correct process for recording and reporting.
VAT reclaim rules for fuel expenses
- VAT can be reclaimed on the fuel element of the advisory fuel rate payment — not on the full mileage amount
- The reclaim is based on the published advisory fuel rate, not the employee’s actual fuel spend (HB Accountants VAT guidance)
- For petrol and diesel, the VAT-reclaimable portion is calculated by applying the VAT fraction (20/120) to the fuel cost implied by the advisory rate
How to record VAT on mileage claims
- Keep a mileage log for each company car showing business vs private miles
- Apply the appropriate advisory fuel rate per mile based on fuel type and engine size
- Calculate the VAT element: multiply the total fuel reimbursement by 20/120 (standard rate) to arrive at the VAT you can reclaim
- Include the VAT amount in your next VAT return under the appropriate box
The catch: if an employer uses September’s rates after 1 December, the VAT reclaim calculation will be based on outdated figures, potentially triggering an HMRC adjustment.
What is the price of fuel in December 2025?
Knowing the advisory fuel rate is only half the picture. The rates are set based on average fuel prices, and those prices have been moving in notable ways as December 2025 approaches.
Petrol and diesel price trends December 2025
- UK average petrol prices in late 2025 have remained broadly stable, hovering around 135-140p per litre according to RAC Fuel Watch motoring organisation data
- Diesel has held a small premium over petrol, typically 2-4p per litre higher
- Stable fuel prices explain why HMRC did not change the petrol and diesel advisory rates from September to December 2025
Impact of global oil price on UK pump prices
- Brent crude oil traded in a narrow range of $70-$78 per barrel through Q4 2025, contributing to steady pump prices
- The relative calm in global oil markets meant HMRC saw no need to adjust the per-mile rates for petrol or diesel vehicles
- Industry analysts at Fuel Finder UK fuel price comparison service note that the stability is unusual — fuel prices typically see more volatility in autumn-winter transitions
For company car drivers, unchanged advisory rates mean predictable reimbursement — but that predictability can mask real fuel cost increases if pump prices spike mid-quarter. HMRC reviews rates quarterly, so any price shock would not be reflected until the next update cycle.
The implication: fleet managers should monitor pump prices independently rather than relying solely on the quarterly HMRC review to gauge actual fuel cost exposure.
Timeline
- 21 November 2025 — HMRC published the December 2025 advisory fuel rates on GOV.UK (HMRC official publication)
- 1 December 2025 — New rates take effect; employers should apply them from this date
- February 2026 (expected) — Next quarterly review; employers should watch for new rates effective March 2026
What this means for payroll: the window between publication (21 Nov) and effective date (1 Dec) is just 10 days — enough time to update systems, but only if finance teams act immediately.
Clarity section
Confirmed facts
- Advisory fuel rates as published on GOV.UK on 21 November 2025 are effective from 1 December 2025 (GOV.UK)
- Petrol rate for engines up to 1400cc: 12p per mile
- Diesel rate for engines up to 1600cc: 12p per mile
- Electric vehicle home-charge rate: 7p per mile (decreased from 8p)
What’s unclear
- Whether any UK budget changes after March 2026 will affect the rates or the quarterly review schedule
- Exact reason petrol and diesel rates held steady given stable but fluctuating fuel prices in late 2025
- Electric vehicle public-charge rate of 14p per mile — cited by Curoca tax compliance specialists but not directly confirmed on GOV.UK
- Whether the quarterly review cycle in February, May, August, and November will continue unchanged after March 2026 (HB Accountants tax advisory firm)
- Whether the September-to-December 2025 freeze in petrol and diesel rates will persist into March 2026 (HB Accountants tax advisory firm)
Quotes
The advisory fuel rates from 1 December 2025 have been added.
— HMRC official guidance notes (GOV.UK advisory fuel rates)
The December 2025 calculation uses 3.59 as the electrical efficiency miles per kilowatt-hour and 25.72p as the electricity cost per kilowatt-hour.
— Ian Holloway, tax commentator, on LinkedIn (cited via Curoca tax compliance specialists)
The two perspectives — official HMRC notice and independent tax analysis — confirm the same underlying methodology for the EV rate change.
Summary
HMRC’s December 2025 advisory fuel rates deliver a rare moment of calm for petrol and diesel company car drivers — no change from the previous quarter. For electric vehicle owners, the 1p reduction in the home-charge rate is a modest but real shift that reflects falling domestic electricity costs. The real deadline is not the rate itself but the systems update: employers who fail to apply the December rates from 1 December risk creating an inadvertent benefit-in-kind for their drivers. Payroll teams must update mileage reimbursement processes before the first December pay run or explain to HMRC why they kept using September’s numbers.
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Frequently asked questions
What are advisory fuel rates?
Advisory fuel rates are published by HMRC to help employers reimburse company car drivers for business mileage without creating a taxable benefit. They are set per fuel type and engine size and updated quarterly.
How often does HMRC update advisory fuel rates?
HMRC reviews and updates advisory fuel rates four times per year — in February, May, August, and November — with changes taking effect from the first day of the following month.
Can advisory fuel rates be used for private mileage reimbursement?
No. Advisory fuel rates are intended only for business mileage in company cars. Private mileage reimbursement is separate and does not fall under the advisory fuel rate framework.
Do advisory fuel rates apply to hybrid cars?
Yes. Hybrid cars are treated according to their primary fuel type. For petrol-electric hybrids, use the petrol advisory fuel rates by engine size. For diesel-electric hybrids, use the diesel rates.
How is the advisory fuel rate calculated for electric vehicles?
The electric vehicle rate is calculated by dividing the average electricity cost per kilowatt-hour by the average vehicle efficiency in miles per kilowatt-hour. For December 2025, HMRC uses 25.72p per kWh and 3.59 miles per kWh, yielding 7p per mile for home charging.
What happens if an employer pays more than the advisory fuel rate?
If an employer reimburses at a rate higher than the advisory fuel rate, the excess is treated as a taxable benefit-in-kind for the employee and must be reported to HMRC via a P11D form.
Are advisory fuel rates different for vans?
Yes. HMRC publishes separate advisory fuel rates for vans. The December 2025 van rates follow the same quarterly structure but reflect the higher fuel consumption of light commercial vehicles.
For a broader view of HMRC rate changes affecting personal finances, see our guide on Tax on Dividends UK 2026 Rates. Employers managing compliance may also find our Share Code Check Employer – UK Right to Work Guide useful for understanding HMRC-related employer obligations.
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Dominic Shaw covers the economy, business, markets and consumer affairs for UKBullet.uk.