Search
Close this search box.
Sign up for our weekly Newsletter

Tax: Free fuel benefit – how to work it out for 2011/12 NEW!

25_FreeFuel246x1551
Free fuel: work out whether it's worth taking

Share

17 February 2011

 

Business women works out if free fuel is worth taking following the Budget 2011 increase in the free fuel benefit
Free fuel: work out whether it’s worth taking

IF YOU are supplied with free fuel for your company car, or as a director of a small business or SME you receive free fuel for your business car, the amount chargeable to income tax (for the driver) and Class 1A national insurance contributions (for the employer) rose following Budget 2011.

The free fuel multiplier increased from £18,000 to £18,800 (from 06 April 2011). So, is taking free fuel for your company car worth it? Here is how the free fuel benefit is calculated.

Multiply the £18,800 fuel multiplier (fuel benefit for 2011/12 tax year) by a percentage based on the rate at which the car emits carbon dioxide (CO2, in g/km). You can see the percentage banding you should use by referring to our company car tax table.

The example is based on a car with a list price of £24,000 when it was first registered and which emits carbon dioxide at a rate of 150g/km placing it in the 20% tax band (petrol) and 23% tax band (diesel).

The business cost of supplying free fuel – apart from the cost of the fuel itself – is the amount of employer’s Class 1A NIC contributions that are payable. This is calculated by multiplying the driver’s taxable benefit by 13.8% (raised from 12.8% as of April 2011) to provide the amount payable.

Fuel benefit Petrol Diesel
Free fuel multiplier £24,000 £24,000
Taxable percentage 20% 23%
Taxable benefit £4800 £5520
Tax (20% taxpayer) £960 £1104
Tax (40% taxpayer) £1656 £2208
Employer’s Class 1A NIC £662 £762

NOTE: No fuel benefit is payable if you repay the cost of private fuel or if fuel is only provided for business journeys. The amount to be paid can be assessed by using the company car fuel rates, which is known as the Approved Fuel Rate (AFR). To work out which rate applies, click here: NEW company car mileage rates – valid from March 2011.

 

Share this article

Facebook
Twitter
LinkedIn
WhatsApp
Reddit
Email

Want more motoring news?

Sign up here for our free weekly serving of motoring.

Sign up here for our free weekly serving of motoring.

Ralph Morton

Ralph Morton

Ralph Morton is an award-winning journalist and the founder of Business Car Manager (now renamed Business Motoring). Ralph writes extensively about the car and van leasing industry as well as wider fleet and company car issues. A former editor of What Car?, Ralph is a vastly experienced writer and editor and has been writing about the automotive sector for over 35 years.

Latest news

Top