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

For 2010/11, the Government set figure for calculating the tax due on employer-provided ‘free’ fuel for private use in a company car rises from £16,900 to £18,000, applicable from 6 April 2010. For vans, the fuel benefit charge rises from the current £500 to £550. 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 – £18,000 from 6 April 2010

Example: an Audi A3 1.6 TDI 105PS has combined fuel consumption of 74.3mpg and CO2 emissions of 99g/km.
• The tax percentage for this model is 13%, so the fuel scale charge for 2010/11 is £18,000 x 13% = £2,340, equating to £468 tax liability for a 20% tax payer, £936 for a 40% tax payer and £1,170 for a 50% tax payer.
• £468 will pay for 88 gallons of diesel for a 20% tax payer (or 177 gallons for a 40% tax payer
and 222 gallons for a 50% tax payer), assuming the national average price for diesel of £5.26/ gallon or 116.0p/litre (March 2010).
• Break-even mileage is 88 x 74.3 = 6,538 private miles for a 20% tax payer (13,151 miles at 40%; 16,494 miles at 50%).

If the number of private miles you cover is less than the break-even mileage, consider paying for the fuel yourself as it will cost less than your tax liability. If the number of private miles you cover is greater than the break-even mileage, you are better off paying the tax.

Last updated: June 2010

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