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

Why ‘free fuel’ isn’t the perk it seems

1074_Company_Car_at_Fuel_Filling_Station landscape

Share

4 June 2013

What’s free fuel?

As far as the taxman is concerned, an employee gets ‘free fuel’ if the employer pays for the employee’s private as well as business fuel use. Just like the provision of a company car, it’s considered a Benefit in Kind; so the employee is taxed, and the employer pays NI. 

 

He added: “The easy solution for employers is to issue fuel cards to drivers and recharge them for private mileage at the value of the fuel through expenses.”

Currently an estimated 10-15 percent of businesses continue to offer employees a fully expensed company car.

 

How do you work it out?

Anyone receiving the benefit of ‘free’ fuel for either cars or vans has to pay the Fuel Scale Charge.

For cars this is calculated as a notional benefit of £21,100 multiplied by the car’s CO2 emissions band and multiplied by the driver’s marginal rate of tax (20 or 40 percent):

Free fuel tax = £21,000 x emissions band x marginal tax rate

(Drivers of diesel-engined cars will have a 3 percent surcharge on this benefit in the same way as they do for company car tax.)

For vans the benefit is assumed at a flat rate of £564.

For the employer’s NI contribution, the sum is:

NI = £21,000 x emissions band x 13.8%

Read more on the recent increase in the tax on free fuel here.

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.

Matt Morton

Matt Morton

Matt Morton is an automotive content writer for Business Car Manager

Latest news

Top