Fuel Benefit Guide

Find out if free fuel is worthwhile

Employees will be taxed if their employer provides any free fuel. This could be as a result of using a company fuelcard and not repaying the private usage element, or if the employer pays for travel between home and work.

As the full taxable benefit depends on the CO2 emissions percentage charge, employees should check that the offer of any free private fuel is worthwhile.

What is it ?

Fuel Benefit is the value of fuel that will be taxed on a company car driver. It is the salary equivalent in the eyes of HMRC though, like most benefits, it escapes National Insurance from the employee. Government policy is to set it at a high level in order to discourage uptake. However it is onerous to prove that it does not apply and so many drivers still have private fuel use paid for by their employer.

How is fuel benefit calculated ?

At the start of each tax year, the government set the Fuel Benefit Multiplier which is roughly based on the cost of an average company car (£24,500 currently) and this is multiplied by the Appropriate Percentage (see Comcar Car Benefit Charge ) to find the level of fuel benefit applicable to a car. Electricity is not considered to be a fuel by HMRC, so there will continue to be zero benefit on fully electric vehicles even when the AP rises to 1% in 2021/22.

Company vans that have significant private usage could also be liable to fuel benefit but no calculation is required. The amount is currently £757 and will rise in line with inflation.

Who does it apply to?

The Fuel Benefit charge applies when the company pays for any fuel used in a company vehicle on a private journey. HMRC take a simple approach and may assume that private use applies unless the driver has kept comprehensive records to show otherwise. For instance if a company fuel card has been used for 15,000 business miles and 5,000 private miles, the driver must be able to provide records which detail the business journeys that make up the 15,000 miles, and also show that they have reimbursed their employer for the 5,000 private miles including VAT on the fuel costs.

Fuel benefit can be prorated if stopped or started part way through the tax year

Privately owned cars

If you use your own car for work, record keeping is much easier and Fuel Benefit cannot apply. If the company pays for any private fuel, this should be taxed in the same way as salary and subject to both income tax and NI.