You've probably had this conversation already.
Your company gets a new electric car. It might be a Tesla, a Polestar, a BMW i4, or something less flashy but still fully electric. You start doing business miles and assume the claim is simple: 55p per mile. That's the headline rate everyone talks about, so that must be the electric car mileage allowance.
That assumption is where directors get into trouble.
For limited company directors, the electric car mileage allowance only makes sense once you answer one question first. Who owns the car? If you miss that, you can end up over-claiming, under-claiming, or mixing up two completely different HMRC systems.
The Common Electric Car Mileage Mistake
A typical example goes like this. A director buys a new company electric car through the limited company, uses it for client meetings and site visits, then tells payroll or their bookkeeper to put through 55p per mile for business travel.
That sounds reasonable. It's also usually wrong.
The problem is simple. 55p per mile applies to a personal car used for business. It doesn't apply when the car is owned by the company. That distinction gets missed constantly, and it's exactly where directors drift into avoidable HMRC problems.
According to this explanation of the director confusion around EV mileage claims, the main gap in existing guidance is the difference between personal EV mileage allowances at 55p per mile and company-owned EV reimbursement at 7p for home charging or 15p for public charging. It also highlights the point many directors miss: if you're driving a company car, you can't claim the higher personal rate.
Why this mistake happens
Most articles lump all EV mileage rules together.
They talk about electric cars, business miles, and tax relief as if one rule covers everything. It doesn't. HMRC splits this into two separate lanes:
- Personal car used for business
- Company car used for business
That split changes the amount you can claim, what the payment is meant to cover, and how you record it.
Practical rule: Before you claim a single mile, decide whether the car belongs to you personally or to your company. That one fact determines the whole tax treatment.
Why directors should care
This isn't just admin. It affects cash flow, corporation tax deductions, your personal tax position, and compliance risk.
Claim too much from a company-owned EV and you may have to unwind the whole thing later. Claim too little on a personal EV and you leave tax relief on the table. Either way, your bottom line loses.
Using Your Personal EV for Business Miles
You buy the EV yourself, insure it yourself, and the company uses it for work trips. In that case, treat it as your personal car for mileage purposes. That puts you in HMRC's Approved Mileage Allowance Payments system, not the company car reimbursement rules.
That distinction matters because the personal EV rate is meant to cover the full cost of using your own car for business, not just the electricity. As explained in this guide to UK EV mileage rates, the approved rate for the 2026/27 tax year is 55p per mile for the first 10,000 business miles and 25p per mile after that, and the rate applies across fuel types rather than giving EVs a separate AMAP rate.
What the personal EV mileage rate covers
If the car belongs to you personally, the company can reimburse you using the approved mileage rate because you are carrying the full ownership and running costs.
That includes:
- Insurance
- Servicing and maintenance
- Tyres, repairs and general wear
- Electricity for charging
- Depreciation and other private ownership costs tied to business use
This is why the rate is much higher than the company EV electricity rate covered later in the article. You are not just reclaiming power costs. You are being compensated for using your own asset for company business.
What to do through your limited company
Keep it simple.
If you use your own EV for business journeys, the best approach is usually to have the company reimburse you at the approved rate for each business mile. That is normally the cleanest answer for tax and admin.
If the company pays less than the approved amount, you should claim tax relief personally on the shortfall. If the company pays nothing, you should claim tax relief on the full approved amount instead. For a wider explanation of how the system works, see this guide to mileage allowance for business.
The records HMRC will expect
This only works if your mileage log is good enough.
For a personal EV mileage claim, keep a record of:
- Date of journey
- Start postcode
- End postcode
- Reason for the trip
- Business miles travelled
A note saying “meeting” is weak. Write what the journey was for and who it related to. If HMRC ever asks questions, vague records create avoidable problems.
Do not miss the passenger allowance
There is also an extra allowance if you carry a fellow employee on the same business trip.
The approved system allows an extra 5p per mile per passenger where the journey is work-related for both people. It is not a huge number, but it is still a valid claim and directors often miss it.
If the car is yours personally, use the personal mileage system properly and claim the full amount you are entitled to. That protects your tax position and stops you underclaiming because the car happens to be electric.
Reimbursing a Company-Owned EV
If the company owns the electric car, stop thinking in terms of the personal electric car mileage allowance. You're now in a different system entirely.
For a company-owned electric vehicle, HMRC uses the Advisory Electricity Rate. This is not a mileage allowance in the same sense as the personal car rules. It is a much narrower reimbursement method.
What the company car rate is for
The company car rate is designed to reimburse electricity used for business travel. That's it.
It does not cover ownership costs, insurance, servicing, maintenance, depreciation, or wear and tear. The company already owns the car, so HMRC doesn't give you a second, tax-advantaged allowance for costs that sit with the company anyway.
As set out in HMRC's advisory fuel rates guidance, for company-owned pure electric cars the Advisory Electricity Rate is 7p per mile for home charging and 15p per mile for public charging as of 1 June 2026.
Why the lower rate is correct
This catches people out because the difference feels harsh. It isn't harsh. It's logical.
With a company EV, the company is already carrying the ownership burden. So HMRC only allows reimbursement for the electricity consumed on business travel. That's why you can't use the personal car framework for a company vehicle.
The same HMRC guidance notes that the old flat 7p treatment was replaced, with the change introduced on 1 September 2025, and that the public charging figure was first set at 12p per mile before being revised to 14p after feedback. The current verified rate to use is the 7p home and 15p public position in that guidance.
AMAP vs AER at a Glance
| Attribute | Personal Car (AMAP) | Company Car (AER) |
|---|---|---|
| Who owns the car | You personally | Your limited company |
| Relevant system | Approved Mileage Allowance Payments | Advisory Electricity Rate |
| Main rate | 55p per mile for the first 10,000 business miles, then 25p after that | 7p per mile for home charging, 15p per mile for public charging |
| What it covers | Electricity, maintenance, insurance, wear and tear | Electricity cost only |
| Can a director claim the higher personal rate | Yes, if it is their own car | No |
| Extra passenger amount | 5p per mile per passenger may apply | Not under the AER framework |
My recommendation for directors
Don't try to force a company car into the personal mileage rules. It won't hold up.
Use the Advisory Electricity Rate properly, separate home charging from public charging where relevant, and treat this as an energy reimbursement exercise, not a profit extraction tool. If your bookkeeping still shows a single flat mileage rate for a company EV, fix it before it becomes a payroll or P11D headache.
Bottom line: A company-owned EV can be tax-efficient overall, but the mileage reimbursement itself is deliberately modest.
Benefit-in-Kind Tax on Company EVs
The mistake some directors make after seeing the lower company EV mileage rate is to conclude that company-owned electric cars are a poor deal.
That's the wrong conclusion.
The mileage reimbursement is only one part of the tax picture. The bigger question is whether the overall structure still works in your favour. In many cases, it does, because the primary advantage sits elsewhere.
Why directors still choose company EVs
When your company provides a car that you can use personally, you usually face a Benefit-in-Kind charge. In plain English, HMRC treats private use of the company car as a taxable benefit.
That's the trade-off. You get the convenience of company ownership, and in return there may be a personal tax charge. For electric cars, that charge is widely seen as one of the reasons directors continue to favour them over higher-emission alternatives.
You can read more about the wider planning angle in this guide to electric vehicles tax.
Why mileage alone is the wrong lens
Too many directors compare only one line item:
- personal EV equals higher mileage claim
- company EV equals lower mileage claim
That comparison is incomplete.
A company EV can still be attractive because the company may handle the vehicle costs directly, admin is often cleaner, and the personal tax cost of having the car can be relatively modest compared with many non-electric alternatives. If you focus only on pence per mile, you can reject a structure that may still be better overall.
The right question isn't “Which option gives me the highest mileage claim?” It's “Which option leaves me in the best net tax position after ownership costs, reimbursement rules, and personal tax are all considered?”
The strategic view
For a time-poor director, this is the decision framework that matters:
- Choose a personal EV if you want the stronger mileage claim and you're happy to own and fund the car yourself.
- Choose a company EV if the wider tax treatment, company-funded costs, and simpler ownership structure outweigh the lower mileage reimbursement.
- Review the whole package, not just one claim rate. A good tax outcome is rarely driven by one number in isolation.
Mileage rules matter. They just shouldn't be the only thing driving the decision.
Worked Examples for Company Directors
Most guidance falls apart when you try to use it in real life. So let's make this practical.
Assume a limited company director drives 12,000 business miles in a year. The only point here is to show how the rules operate. The right answer for you depends on how the car is owned, how often you charge at home versus in public, and what wider tax planning you're doing.
Scenario A using a personal EV
You personally own the car. The company reimburses business mileage under the approved mileage rules.
The calculation is simple:
- First 10,000 business miles at 55p
- Remaining 2,000 business miles at 25p
That gives you:
- 10,000 x 55p = £5,500
- 2,000 x 25p = £500
Total potential reimbursement: £6,000
That figure is doing a lot of work. It isn't just reimbursing electricity. It is the tax-approved shorthand for the wider cost of using your own car for company business.
What this means in the real world
If the company pays you the full approved amount, that's usually the cleanest result.
If the company pays less than that, the shortfall doesn't automatically disappear. You may still be able to claim tax relief personally, assuming your mileage records are good enough. That's often where directors miss value, especially if they've been taking a rough-and-ready approach to expenses.
Here's the practical upside of the personal EV route:
- Higher cash reimbursement for business miles
- No company car ownership issue
- No need to split home and public charging claims under the company car electricity rules
The trade-off is just as important. You own the vehicle, you fund it personally, and you carry the non-tax hassle that comes with that.
Scenario B using a company-owned EV
Now assume the company owns the electric car.
You cannot use the personal mileage framework. The business only reimburses electricity for business use, using the Advisory Electricity Rate. If your charging pattern includes a mix of home and public charging, you need to use the appropriate rate for each set of miles.
Take a simple split:
- 6,000 business miles based on home charging at 7p
- 6,000 business miles based on public charging at 15p
That gives you:
- 6,000 x 7p = £420
- 6,000 x 15p = £900
Total electricity reimbursement: £1,320
That is dramatically lower than the personal car reimbursement. It should be. The company car method only reimburses electricity, not ownership costs.
Side-by-side view
| Scenario | Ownership | Mileage treatment | Annual amount based on the example |
|---|---|---|---|
| Personal EV | Director owns the car | AMAP | £6,000 |
| Company EV | Company owns the car | AER | £1,320 |
This is the point where directors often react too quickly and say the personal route is obviously better.
It might be. It might not.
The part many directors overlook
The company-owned route can still win overall if the wider tax treatment of the vehicle, plus company-funded running costs, outweigh the lower direct reimbursement.
The personal route gives stronger cash flow through mileage claims. The company route can offer a more efficient overall structure in the right circumstances, especially when you want the company to own the asset and absorb the associated costs.
Decision shortcut: If you're judging the structure only by the mileage claim, you're using the wrong yardstick.
How I'd approach the choice
For a high-mileage director who already owns a suitable electric car personally, the approved mileage route is often attractive because the reimbursement is materially stronger.
For a director who wants the company to provide the car and is looking at the vehicle as part of wider remuneration planning, the lower reimbursement may be acceptable. In that case, the mileage claim is just one line in a broader tax strategy.
What matters is consistency. Pick the correct method, document it properly, and don't switch logic halfway through the year because one rate looks more generous.
Record Keeping and VAT Compliance Rules
At this stage, good tax planning either survives contact with HMRC or falls apart.
A mileage claim without records is just a story. Whether you use a Tesla, a Kia EV6, or a Hyundai Ioniq 5, the brand doesn't matter. The evidence does.
Your mileage log needs to be usable
Keep a log that someone else could understand without asking you follow-up questions.
At minimum, your records should show:
- The date of each business journey
- Where you started, ideally with the start postcode
- Where you finished, ideally with the end postcode
- Why the trip was business-related
- The business miles travelled
- Whether the car was personal or company-owned, so the claim method is obvious
If your records are spread across diary entries, calendar notes, and charging apps, pull them together into one clean log. HMRC won't do that stitching for you.
Don't treat VAT as an afterthought
VAT on EV costs confuses a lot of directors because electricity doesn't fit the old petrol-station habit.
The safe approach is to separate the questions:
- what reimbursement rule applies for direct tax
- what evidence exists for VAT
- whether the business, the individual, or the card account incurred the cost
Public charging usually comes with clearer purchase evidence than home charging. Home charging is often more awkward because the electricity bill sits in a personal name and includes mixed use. That doesn't mean VAT treatment is impossible, but it does mean you should be careful before assuming the company can reclaim everything.
If VAT is part of your setup, this overview of VAT registration benefits helps frame the wider issue.
A practical compliance checklist
Use this before you submit or approve EV claims:
- Match ownership to method so personal cars use the approved mileage route and company cars use the electricity reimbursement route.
- Keep the journey reason specific. “Meeting with client at Canary Wharf office” is better than “work”.
- Separate charging types for company EVs if home and public charging both apply.
- Retain invoices and receipts where they exist, especially for public charging.
- Review claims regularly instead of trying to rebuild a full year from memory.
Clean records protect the deduction. Messy records invite questions.
The directors who get this right aren't doing anything clever. They're just using the correct rule for the correct car and keeping enough evidence to support it.
If you're weighing up a personal EV against a company-owned EV, or you suspect you've been using the wrong electric car mileage allowance, Tax Compass can help you understand the tax position before you lock in the wrong setup. It's a practical place to review your options, spot inefficiencies, and decide whether a more customized tax strategy is worth pursuing.