What is a Company Car Fuel Benefit?

The company car fuel benefit is applicable to tax payers who use their company car for personal use and don’t pay for the fuel themselves. Normal commuting is classed as personal use for company car fuel benefit purposes.

The company car fuel benefit charge means that you will pay more income tax because HMRC classifies the free fuel for personal journeys as a benefit in kind.

The fuel benefit will be added on to the company car benefit and taxed along with your salary.

If your company subsidises the cost of the fuel used for your personal mileage you won’t need to pay any more tax because your employer is covering the cost for you.

How is the company car fuel benefit calculated?

The company car fuel benefit is worked out using the BIK rate, fuel benefit charge multiplier and the rate at which you pay tax.

The car fuel benefit calculation is:

BIK rate % x fuel benefit charge multiplier x your tax rate %

• The benefit in kind rate (BIK) is given as a percentage and is based on the CO2 emission levels of your car.
• The fuel benefit charge multiplier is decided by HMRC and is usually changed from the start of each tax year.
• The rate at which you pay income tax will be 20%, 40% or 45%. You may pay tax at more than one rate depending on how much you earn.

Company Car Fuel Benefit example

To work out the tax you will pay on a car fuel benefit you will need your cars BIK rate, car benefit multiplier and the rate of tax you pay as a percentage.

In this example we are using rates from the 2022/2023 tax year with a car benefit multiplier figure of £25300.

BIK rate of 25% x car fuel benefit multiplier £25300 = £6325

£6325 is then multiplied by the rate of tax you pay as a percentage. Most taxpayers pay tax at a rate of either 20% or 40%. In this example we will use a rate of 20%.

£6325 x 20% = £1265 income tax payable

Company Car Fuel Benefit Multiplier

To work out the car fuel benefit charge HMRC use a car fuel benefit multiplier which is used as part of the calculation.

The value of the multiplier usually increases each tax year with the value being £27800 for the 2023/2024 tax year moving up from £25300 in the previous tax year.

Is the car fuel benefit worth having?

In some cases it may not be financially worth having a company car fuel benefit. Before you agree to a company car with a fuel benefit it’s worth calculating the effects on the amount of tax you will pay.

You could end up paying more for the fuel in comparison to paying for the fuel yourself or just paying your employer back for the cost of the private usage.

The figures you need to compare are the car fuel benefit amount and the actual amount you would spend on the fuel if you paid for it yourself. If the amount you would spend on the fuel yourself is less than the fuel benefit then you will pay more for your fuel.

It all depends on the number of private miles you are driving in your company car so it’s case of working out the sums before committing.

Electric company van fuel benefit

Electric company vans used for private travel do not currently incur any benefit in kind charge. HMRC gives the driver of an electric company van unrestricted private use without having to pay more income tax.

Company car fuel tax rebate

A company car mileage tax rebate can be claimed if you have to pay for the fuel for work mileage and you aren’t reimbursed the full advisory fuel rates by your employer.

To claim you will need mileage records and use the advisory fuel rates or advisory electricity rate if you run an electric company car.