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Employer-provided ‘free’ fuel for private mileage: benefit or liability?

Employees who are in receipt of company funded fuel used privately will see their benefit-in-kind tax bills rise from April 6, 2010.

The Chancellor announced that the fuel benefit charge multiplier will increase from £16,900 to £18,000, while the van fuel benefit charge – on which tax on ‘free’ van fuel is paid – will increase from £500 to £550.

It means that for company car drivers in receipt of employer paid for fuel used privately that those with a vehicle with a P11D value above £18,000 will pay more in tax on fuel than they will on their vehicle.

Additionally, the breakeven point at which ‘free’ fuel becomes viable increases by about 1,000 private miles a year to approximately 16,400 miles on an average upper medium car.

From April 2010, the Government set figure for calculating the tax due on employer-provided ‘free’ fuel for private use in a company car rises to £18,000. To calculate the tax, you need to know:

  • The car’s combined fuel consumption and BIK tax percentage
  • The price of fuel used
  • The driver’s marginal tax rate and Government set figure

Author: Lee Sibbald, April 4, 2008

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