When it comes to claiming back costs for business travel, employees and employers often get confused between Mileage Allowance Rates and Advisory Fuel Rates. Both deal with travel expenses, but they apply in very different circumstances.

Mileage Allowance (Approved Mileage Rates AMR)

If you’re an employee using your own car for business journeys, HMRC allows you to claim Approved Mileage Rates (AMR).
These rates are designed to cover all the running costs of your car, not just fuel, but also wear and tear, insurance, servicing, and road tax.

Check the official HMRC Approved Mileage Rates.

Current AMR

  • First 10,000 business miles per year (45p per mile).
  • Over 10,000 miles per year (25p per mile).

You can also claim an extra 5p per mile per passenger if you carry fellow employees on the same business trip. These rates have not changed since 2011.

Advisory Fuel Rates (AFR)

If you drive a company car, the rules are different. HMRC provides Advisory Fuel Rates (AFR) which cover only the fuel costs, not the general running costs of the car, as those are usually met by the employer.

The official guidance is updated quarterly: HMRC Advisory Fuel Rates.

How AFR Works

  • Used when an employer reimburses fuel costs for business mileage.
  • Also used if an employee repays fuel for private journeys in a company car.
  • Rates vary depending on engine size and fuel type.

Electric Cars and AFR

Electric vehicles (EVs) are now included under Advisory Fuel Rates. From 1 September 2025, HMRC will split electric rates between:

  • Home charging – based on domestic electricity rates and average miles per kilowatt hour.
  • Public charging – based on higher costs at public charging stations.

This reflects the growing difference between home and public charging prices.

Mileage Allowance vs Advisory Fuel Rates: Key Takeaways

  • AMR: For personal vehicles used for business. Covers all running costs, including fuel. Fixed rates (last updated in 2011).
  • AFR: For company cars. Covers fuel only and updated quarterly. Also applies to repaying fuel for private journeys.
  • Electric cars: Covered by AFR, with new rules from September 2025 splitting home vs public charging rates.

Both systems aim to make sure employees are fairly compensated (or repaid fairly) for fuel and travel, but knowing which one applies to your situation is key.

Rachael Olukoju
Rachael Olukoju

Rachael is a diligent qualified accountant with audit experience and joined us from a top 15 accountancy firm. With a thirst for knowledge and personal development, Rachael continues to study towards further qualifications. She is a strong communicator who is passionate, goal-driven and leads by example. Rachael has significant experience in management and statutory accounts preparation and review alongside a strong understanding of reporting and completion against strict deadlines.