If you put free fuel in your company-provided business car, the cost of doing so rises this month (tax year 2008/09).
The Chancellor has raised the free fuel benefit multiplier from £14,400 in 2007/08 to £16,900 in 2008/09.
In practice, this means you need to ensure it remains a worthwhile benefit.
For example, the driver of an £18,000 petrol business car with CO2 emissions of 180g/km faces a £297 tax increase for taking free fuel (assuming they pay tax at the 40% rate).
That means the driver will need to cover private mileage during the month equating to £135 worth of fuel to ensure it remains a benefit.
The free fuel benefit is worked out by multiplying the free fuel benefit of £16,900 by the car’s company car tax percentage figure based on its CO2 emissions. You then multiply this by your standard rate of tax (20% or 40% for 2008/09). Some typical examples are below.
It’s also worth remembering that there is a business cost to supplying free fuel for employees over and above the cost of fuel. Class 1A contributions are due on the benefit (which you can work out by multiplying the taxable benefit by 12.8% to arrive at the figure due).
Free fuel: so how much will it cost?
Audi A4 1.8 TFSI SE 4dr, 169g/km
- CO2 tax band 21%
- Tax payable for free fuel £710/£1420 (20%/40%)
Ford Focus Zetec 1.8 TDCi 5dr, 137g/km
- CO2 tax band 18%
- Tax payable for free fuel £608/£1217 (20%/40%)
Honda Civic 1.8i-VTEC ES 5dr, 152g/km
- CO2 tax band 18%
- Tax payable for free fuel £608/£1217 (20%/40%)
Mercedes-Benz C-Class 220 CDI SE 4dr auto, 173g/km
- CO2 tax band 25%
- Tax payable for free fuel £845/£1690 (20%/40%)
Land Rover Discovery 3 TDV6 GS 7str 5dr auto, 270g/km
- CO2 tax band 35%
- Tax payable for free fuel £1183/£2366 (20%/40%)
Further information
- Go to How to work out free fuel benefit in our Law & Tax section
New tax year changes to free fuel benefit
