HMRC new rule changes will see petrol and diesel car owners facing increased company car rates from March 1.
The new Advisory Fuel Rates for 2025 will be effective from this Saturday. The revised rates include a one penny increase for diesel cars with engines up to 1,600cc, which will rise from 11 to 12 pence per mile. For petrol vehicles, the change is key for cars with engine sizes between 1,401-2,000cc, where rates will go up from 14 to 15 pence per mile.
Diesel cars with engines up to 1,600cc will experience an increase to 12ppm, but rates for larger engines will remain the same.
Diesel vehicles with engines between 1,601-2,000cc will continue at 13 pence per mile, and the rate for diesel cars with engines over 2,000cc will remain at 17 pence per mile.
From March 1 2025, the advisory electric rate for fully electric cars will stay the same, at 7 pence per mile.
These rates apply to employees using a company car.
Companies use these rates when they:
- reimburse employees for business travel in their company cars
- need employees to repay the cost of fuel used for private travel
HMRC reviews rates quarterly in March, June, September and December.
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Tax changes for electric vehicles
These moves come alongside more extensive changes for electric vehicles.
From April 1, 2025, drivers of electric vehicles will be required to pay Vehicle Excise Duty – or VED – representing a significant hike in the cost of ownership.
Plus, a new Expensive Car Supplement will see buyers of electric vehicles costing over £40,000 paying as much as £620 a year in tax.
For electric, zero or low emissions vehicles registered on or after April 1, 2025, drivers will have to pay the lowest first-rate of tax – £10 – but from the second tax payment onwards, this will rise to the standard rate of £195 a year.
Electric, zero or low-emission cars registered between April 1, 2017 and March 31, 2025, will now pay the standard rate of £195. In contrast, EVs registered between March 1, 2001 and March 31, 2017, will move to the first band that has a VED value, meaning a tax payment of £20.
Electric vehicles have also – up until this point – been exempt from the Expensive Car Supplement, but that all changes from April 1 with cars registered on or after this date are now liable for the additional cost.
This means drivers of EVs costing over £40,000 will have to pay a standard rate alongside an additional supplement for the first five years from the start of the second payment. For many, this means many owners of an EV over £40,000 will pay £620 per year in road tax.
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