So let’s work it out based on a Ford Focus 1.5 TDCi Zetec 120PS
|Combined fuel consumption||74.3mpg|
|Fuel scale charge 2017/18||£22,600|
|Company car tax band 2017/18||21%|
|Taxable value 2017/18||£22,600 x 21% = £4746|
|BIK tax due on free fuel 20%/40%||£949/£1898|
Assuming the average price of diesel at February 2017’s figure of £5.55 a gallon (£1.22 a litre), £949 will pay for some 171 gallons (777 litres) for a 20% tax payer and 342 gallons (1554 litres) for someone in the 40% tax bracket.
Break-even mileage to make free fuel worthwhile in the Ford Mondeo
|20% tax payer||171 x 74.3 = 12,705 miles|
|40% tax payer||342 x 74.3 = 25,410 miles|
If you cover fewer private miles – not total miles – than the calculated break even figure, then it’s worth considering giving up the free fuel perk as it’s costing you more in tax than the fuel you pay for.
If, on the other hand, you travel more private miles than the break-even calculation, then you are better off paying the tax.
What about the fuel benefit charge on an electric car?
The taxman says electricity is not a fuel and therefore no fuel benefit charge is payable. For more on this click Electric car business mileage rates
Free fuel and business owners
- If you provide your company car drivers with free fuel then you will pay Class 1A National Insurance Contributions on the benefit
- The Class 1A NIC for 2017/18 remains at 13.8%