Company Car Fuel Benefit
Company car fuel benefit: Is it worth it?
If you have a company car that is paid for by your employer, which you use full time including out of business hours, then you’ll need to pay the company car fuel benefit.
Unfortunately, it’s not as simple as just giving back a percentage of the fuel used, which can make it confusing to work out. In some cases, this benefit can cost you more than filling up and paying for fuel yourself. You need to work out how much you’d have to owe to find out if it’s worth it.
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What is a company car fuel benefit?
This tax is for employees who have been given a company car and free fuel to use in personal hours. A company car fuel benefit is a tax that’s charged to you for using the fuel that’s paid for by your employer, which is why HMRC regards it as free fuel.
It will, therefore, still cost you to receive the fuel as this tax still need to be paid. If your employer does not subsidise this benefit, you will be taxed accordingly.
How to calculate company car fuel benefit?
To calculate how much fuel benefit you'll have to pay, you need to calculate the vehicle's benefit in kind with a fuel charge multiplier.
The benefit in kind or BIK tax is evaluated by multiplying the car’s CO2 emission level, the value of the car when new - including any modifications - and your income tax bracket. If you’re unsure how to calculate your tax rate, find out more about BIK tax here.
To work out if the company car fuel benefit is worth it, make this calculation to see how much tax you’ll need to pay annually:
Your BIK percentage multiplied with £23,400 for the 2018/19 tax year. This car tax multiplier can change each year and the rate is controlled by HMRC.
If your BIK percentage was 25%, as your petrol vehicle falls into the 105-109 CO2 bracket, then you’d multiply 25% by 23,400 to reach £5,850.
Reduce the £5,850 figure by multiplying it by your tax margin, which is typically either 20% or 40%.
£5850 x 20% = £1170 tax payable.
If you are spending under £1170 a year on fuel then the car fuel benefit is perhaps not worth it, as you’d still have to pay the calculated amount.
Is it worth it?
This all depends on how many miles you’re clocking up on your company car.
If you are on average paying out more for fuel than the car fuel benefit amount, then having a company car and receiving free fuel is worth it. But, if you don’t spend that much on fuel, then you’d actually be paying more with this benefit.
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If you are an employer and you pay for your fleets’ fuel during personal times you will not only have to pay for the full cost of the fuel, but you’ll have to contribute a significant amount of National Insurance. This is because you’re giving out a taxable company benefit.
It’s worth looking into and researching the typical amount you'd have to pay before agreeing to a company car with car fuel benefit fees attached.