For 2008/9, the Government set figure for calculating the tax due on employer-provided ‘free’ fuel for private use in a company car rises to £16,900. 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

Calculating your ‘break-even’ mileage
Example: Volkswagen Passat S 1.9 TDI 4dr with combined fuel consumption of 50.4mpg and CO2 emissions of 148g/km.

• The tax percentage for this model is 20%, so fuel scale charge for 2008/9 is £16,900 x 20% = £3,380, equating to £676 tax liability for a 20% tax payer (or £1,352 for a 40% tax payer).
• £676 will pay for 134 gallons of diesel for a 20% tax payer (or 268 gallons for a 40% tax payer), assuming the national average price for diesel of £5.04/gallon or 110.8p/litre.
• Break-even mileage is 134 x 50.4 = 6,754 private miles for a 20% tax payer (or 13,507 private miles for a 40% tax payer).

‘Free’ fuel: 2008/9 emissions-based charge

For example, a petrol car has CO2 emissions of 140g/km.
Percentage used to calculate the company car fuel tax charge for 2008/9 is 15%.

Using the Government’s set figure of £16,900 for 2008/9 the fuel scale charge is calculated as follows: £16,900 x 15% = £2,535.

Therefore, a 20% tax payer will pay £2,535 x 20% = £507; a 40% tax payer will pay £2,535 x 40% = £1,014.

• Vehicle excise duty (VED) in 2008/9
• 2009 vehicle excise duty reform
• Company car tax in 2008/9
• Company car tax: calculating your benefit-in-kind liability in 2008/9
• Business mileage in a private car: reimbursement rates in 2008/9
• Employer-provided ‘free’ fuel for private mileage: benefit or liability?
• Capital allowances to be based on emissions of CO2 from April 2009
• Calculation of employers’ Class 1A National Insurance Contributions
• Company vans
• Biofuels