Get the best benefit when it comes to car fuel tax

When it comes to company cars, fuel and tax can be a complicated business.

It may not seem so at first – you have a car, you use it for work, so you can include it as a business expense, surely?

Unfortunately, it’s not that simple.

Company car tax
Company cars are considered a Benefit In Kind (BIK) by HMRC and are therefore subject to income tax. You’re liable to pay income tax if you use your company car for personal journeys.

If your employer provides fuel for your company car and you use it for personal journeys, you also have to pay tax on fuel benefit.


Private mileage
In practice, all company car drivers are likely to clock up some private mileage – even if it’s just the daily commute.


It is possible however, to avoid the hefty charge.



To avoid the car fuel benefit charge you need to show that your employer isn’t covering the cost of fuel for your personal journeys. There are two ways to do this:


1: Reimbursement

You can pay for the fuel yourself up front and put your business journeys down as an expense.


Or, your employer can pay for the fuel and recover the cost of the private journeys from you.


2: Replacement

You and your employer can enter into a pro-quo arrangement. Say for example, that your employer covers the fuel costs and you use the car for 40 miles worth of personal journeys. Under the agreement, you’ll then pay for fuel to cover the next 40 miles of business trips.


Record keeping

Either way, you need to keep accurate mileage records and make sure you reimburse your employer the right amount.

If HMRC think you’ve underpaid, it could trigger a hefty tax charge.

HMRC, by the way, publishes recommended reimbursement rates quarterly.



It is also worth bearing in mind that there are some instances where fuel benefit doesn’t apply.  Such as with Pool cars:
Pool cars
Employers do not have to pay or report on pool cars as they’re not regarded as an employee related benefit. There are strict criteria to classify a car as a pool car though so check to ensure you do not fall foul of the rules.

There’s certainly plenty to think about!

If you need help working out your car or fuel BIK, then Aspirations Accountancy is here to help.

Contact us today

Give us a call today on 01634 298238 or email and we’ll help you make your tax less taxing.



Disclaimer: Articles are accurate at the time of posting but may be affected by legislative changes and individual circumstances.  Please always contact us for personalised advise and assistance.