Katerina Swanson
There are a few different types of car fuel allowances. There are fuel allowances offered by employers to employees, which are often provided in the form of a company fuel card. These are not taxable. There are also fuel allowances provided by the government, which are means-tested and based on welfare payments and income. Finally, there are fuel allowances for those who are unable to meet the cost of their energy bills on their own. These vary in how much they are worth and how they are paid out.
Characteristics and Values of Car Fuel Allowance
| Characteristics | Values |
|---|---|
| Reimbursement rate for personally owned vehicles | 45p per mile for the first 10,000 miles, and 25p per mile for any subsequent mileage |
| Reimbursement rate for company-owned vehicles | AFR rate, which differs depending on the type of engine and vehicle's engine size |
| Fuel allowance exemption | Not taxable, added to salary as a tax-saving component |
| Fuel benefit tax | Applicable if the private usage element is not repaid by the employee or if the fuel allowance covers private usage for part of the year |
| Fuel allowance in Ireland | €33 per week, with a total allowance of €924 for the season |
| Eligibility for fuel allowance in Ireland | Aged 70 or over, or 66 or over from 1 January 2025, and satisfying a means test; or under 70 (or 66 from January 2025) and receiving qualifying social welfare payments and satisfying a means test |
| Qualifying social welfare payments in Ireland | State pension, Disability Allowance, One Parent Family Payment, or Farm Assist |
| Fuel allowance in the UK | 5p per passenger per business mile for carrying fellow employees in a car or van on work journeys |
| Qualification criteria for fuel allowance | Living alone or with a spouse, civil partner, or cohabitant who qualifies for an increase in pension or social welfare payment; receiving specific social welfare payments, such as Jobseeker's Allowance for more than 312 days |
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What You'll Learn
Employee fuel card tax implications
Fuel cards are a common way for employers to help employees with the rising costs of fuel. They can be used to purchase fuel, maintenance, and fleet expenses for work-related travel. They may also provide cost-control measures, cashback, rebates, and tax exemptions. However, there are tax implications for both the employer and the employee if the fuel card is used for private mileage.
The use of a fuel card for business purposes is not classed as a taxable benefit, and no tax need be paid unless the card is used to cover the cost of fuel for personal travel. In this case, the company is liable to pay tax charges and the business must pay the user's National Insurance contributions on the value of the fuel used for personal use. The employee must pay back any fuel card expenditure for private use to the business.
To avoid this, it is important to keep clear records of business and private mileage for all fuel card users. HMRC requires this information to ensure tax liabilities are being met. A mileage log or another detailed form of proof is required for reimbursement, otherwise, it is considered a fringe benefit or taxable income. A mileage reimbursement policy can be implemented to clarify which travels are considered business-related.
The IRS has strict rules on how to govern fuel cards and reimbursements. If an employee can prove the gas was used for business, then it is non-taxable. If not, it is taxable. It is important to define business use vs. personal use and place reasonable limits on total fuel use.
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Employer reimbursement rates
There are different reimbursement rates for fuel allowances depending on whether the vehicle is company-owned or personally owned by the employee. If the vehicle is company-owned, the reimbursement rate is the Advisory Fuel Rate (AFR). This rate differs depending on the type of engine and the vehicle's engine size. The AFR rate does not apply to electric vehicles.
If the vehicle is personally owned by the employee, the relevant reimbursement rate is the Approved Mileage Allowance Payments (AMAP) rate. This rate is slightly higher than the AFR rate because it reimburses employees not only for fuel but also for some on-road driving costs. The current AMAP rates are 45p per mile for the first 10,000 miles and 25p per mile for any subsequent mileage. These rates apply to all vehicles, including electric cars.
It is important to note that if an employee is given a company fuel card and they do not repay the private usage element, they will need to pay Fuel Benefit Tax on the private-use amount. Similarly, if an employee is given a fuel allowance that covers private as well as business fuel for only part of the year, they will still have to pay Fuel Benefit Tax for the entire year.
Employers can reclaim VAT on reimbursements made to employees, but only for business mileage, not for private mileage. To do this, the employee will need to provide their employer with their mileage record and fuel invoices if they are using a fuel card.
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Welfare payment eligibility
Fuel Allowance is a payment to help with the cost of heating your home during the winter months. It is paid to people who are dependent on long-term social welfare or HSE payments. The Fuel Allowance payment is currently €33 per week. The Winter Fuel Allowance usually costs the State around €240 million a year. It is paid to approximately 365,000 households. Over the full 28 weeks, this will amount to a payment total of €924.
Eligibility for Fuel Allowance depends on the type of welfare payments you receive and other factors. You may get Fuel Allowance if:
- You are aged 70 or over, or aged 66 or over from 1 January 2025, and satisfy a means test.
- You are under the age of 70, or under the age of 66 from 1 January 2025, and are receiving a qualifying social welfare payment and satisfy a means test.
- If you are under the age of 70 (or 66 from January 2025), you need to be claiming certain welfare payments to get the Fuel Allowance.
You can qualify if you have been getting Basic Supplementary Welfare Allowance for more than a year (364 days over 12 months). You qualify if you have been getting Jobseeker's Allowance for more than 312 days (over 12 months). Days on Jobseeker's Benefit (JB) and Pandemic Unemployment Payment (PUP) can count towards the 312 days, if your JB or PUP was immediately before your JA claim. You can keep your Fuel Allowance if you move to Jobseeker’s Allowance from One Parent Family Payment, Carer’s Allowance or Jobseeker’s Transitional payment. If you are getting Jobseeker’s Allowance, and your spouse, civil partner, or cohabitant is on a Community Employment (CE) scheme, they can be considered a qualified adult on your payment if you apply for Fuel Allowance.
If someone in the household is getting a qualifying social insurance payment, such as a State Pension (Contributory) or Invalidity Pension, they should apply first (so a means test can be carried out on their income). Another qualifying person in the household can also apply for Fuel Allowance, but they must include information about the person getting a social insurance payment. If someone in the household is 66 or over, they should apply. If you are 66 or over, you don’t need to be getting a qualifying social welfare payment to get Fuel Allowance. However, you must satisfy a means test.
People getting certain social welfare payments can choose to get their Fuel Allowance paid in two instalments. The first instalment sum is paid at the start of the Fuel Allowance season, and the second is paid in January. To get your Fuel Allowance paid in two instalments, you can apply by completing the Change the Payment Frequency of Fuel Allowance Application Form (FA CPF1). You should submit the completed form at least one month before the Fuel Allowance season starts. If you submit it during the season, your payment will continue to be paid weekly until the next instalment is due. Please note the instalment option is not available on all schemes.
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Fuel allowance exemptions
Employee Benefits
Employers can offer fuel allowances as a tax-saving component for employees, which is not taxable. This means that a certain portion of an employee's salary related to fuel expenses is exempt from taxation. In some countries, like India, the government sets a maximum limit on this exemption, such as ₹2400 per month. This limit applies to all employees with taxable income, simplifying the process by eliminating the need for calculating fuel allowance exemptions individually.
Additionally, companies may offer fuel allowance cards, such as Pazcard, which can be used to claim fuel allowances at petrol stations. This provides a convenient way for employees to benefit from their fuel allowance exemptions.
Social Welfare Benefits
In cases where multiple household members receive social welfare payments, the person receiving a qualifying social insurance payment, such as a State Pension, should apply first for a means test. However, if one household member is 66 or older, they are exempt from needing a qualifying social welfare payment and only need to pass a means test.
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Benefit-in-kind tax
A benefit-in-kind is the name given to benefits received by employees from their employers that are not included in their salary. One such benefit is a company car, which may come with free fuel provided by the employer.
If you are a director or employee and your company provides you with a car and free fuel, you will be taxed on the cash equivalent of the benefit each tax year. This benefit charge is calculated by taking the appropriate percentage, as determined for car benefit purposes, and multiplying it by a fixed figure. It's important to note that the benefits associated with a company van are calculated differently.
The appropriate percentage used in the calculation is based on the level of CO2 emissions and the fuel type of the car. For example, if the company car has high CO2 emissions and runs on petrol, the benefit charge will be higher. On the other hand, if the company car has low CO2 emissions or uses a more environmentally friendly fuel type, such as electricity, the benefit charge may be lower or even non-existent.
It's worth noting that, as per the legislation governing Optional Remuneration Arrangements, if a cash allowance is offered but the fuel benefit is selected, and the CO2 emissions of the company car exceed 75 g/km, the fuel benefit charge will be the greater of the annual cash allowance and the cash equivalent of the fuel benefit.
Additionally, if your employer provides a facility to supply or directly supplies electricity for your company car, there is no fuel benefit charge as HMRC does not regard electricity as fuel. This exemption applies when the facilities are made available to all employees in the workplace.
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Frequently asked questions
A fuel allowance is a means-tested payment that helps cover the cost of heating your home if you're on social welfare payments. It is usually paid weekly but can also be claimed in two lump sums.
The fuel allowance is worth €924 and can be paid weekly or in two instalments. The current rate is €33 per week. The lump-sum payment in September and January is €462 per instalment.
Eligibility for a fuel allowance depends on the type of welfare payments you receive. You may be eligible if you are aged 70 or over, or 66 and over from 1 January 2025, and satisfy a means test. You can also apply if you are under 70 (or 66 from January 2025) and are receiving a qualifying social welfare payment and satisfy a means test.
