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free fuel

The Ford Focus is a popular company car for the business driver

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
CO2 emissions 99g/km
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%


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