Company Fuel Tax
A guide to understanding fuel benefit
What's company fuel tax?
Company fuel tax, also known as fuel benefit, is a tax on any fuel in your company car that's used for personal use. You should be aware that travelling to and from work is classed as personal use.
The tax applies to any fuel you use a business fuel card to buy, or that you pay for personally but are then reimbursed by the company for. Please note that even if you only have free fuel for a portion of the year the fuel tax will be applied for the full tax year.
For employers, you'll need to report on form P11D and pay class 1A national insurance on the value of the fuel benefit for any fuel for private use that your employees don't repay the business for.
Who's exempt?
There are a few occasions where you may be exempt from paying this tax.
These include:
- If you pay for your own fuel rather than the business paying for it.
- If your vehicle's only used for business purposes.
- A car that's adapted for an employee with a disability may be exempt in certain situations. Please see the full guidelines on the HMRC website.
- The tax won't be applied to vehicles that are used as pool cars: cars that are used for only business purposes and kept on the company premises.
How do you calculate the company fuel tax?
To work out the tax for your company car you'll need to know the BIK rate. For more information on how to find out the BIK tax on your vehicle, please take a look at our Guide to Company Car Tax.
The BIK percentage is multiplied by a fixed sum which is called the car fuel benefit charge multiplier, to calculate the company fuel tax and then your personal tax margin to work out the fuel tax you'll need to pay. The current amount is £27,800, rising to £28,200 for the tax year from April 2025.
For example, let's take a car with a BIK band of 12%. £27,800 x 12% = £3,336. If you're a 20% taxpayer, multiply £3,336 by 20% to get the annual tax amount of £667. A 40% taxpayer would pay £1,334 per year (£3,336 x 40%). This is the amount you would need to pay over the year.
For more information on the pros and cons of company cars, check out our guide to the company car. Or if you'd like more information on business leasing in general you can take a look at this guide or call us on 0330 221 0000. One of the team will be happy to answer any questions you might have.