Regan Brown
If your employer pays for your company car, you'll need to pay the company car fuel benefit. The car fuel benefit charge is calculated by multiplying the fuel benefit charge multiplier by the car's 'appropriate percentage'. This is the CO2 emissions-derived percentage used to calculate the car benefit charge, including any diesel supplement. The car fuel benefit charge multiplier can change each year and is controlled by HMRC. For the 2023/2024 tax year, the multiplier was £27,800.
| Characteristics | Values |
|---|---|
| Fixed figure for 2023-24 | £27,800 |
| Fixed figure for 2022-23 | £25,300 |
| 'Private use' | Includes employees' journeys between home and work |
| Fuel type for diesel cars that meet the Euro 6d standard | F |
| Fuel type for other diesel cars | D |
| Fuel type for all other cars | A |
| Car's appropriate percentage | CO₂ emissions derived percentage used to calculate the car benefit charge, including any diesel supplement |
| Fuel benefit charge for employer-provided private fuel | Reimbursed at cost or by using HMRC's Advisory Fuel Rates |
| Fuel benefit charge if the employee pays for the full cost of all private fuel | Nil |
| Fuel benefit charge if the company car is available only for part of the year | Proportionately reduced |
| Fuel benefit charge if private fuel ceases to be provided part-way through a year | Proportionately reduced |
| Fuel benefit charge if the benefit of the car is shared | Proportionately reduced |
| Fuel benefit charge if the employer provides electricity for the car | Nil |
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What You'll Learn
Calculating the car fuel benefit charge
To calculate the car fuel benefit charge, you must multiply the fuel benefit charge multiplier by the car's "appropriate percentage". The "appropriate percentage" is the CO2 emissions-derived percentage used to calculate the car benefit charge, including any diesel supplement. The fuel benefit charge multiplier is subject to change each year and is controlled by HMRC. For the 2023/2024 tax year, the multiplier was £27,800.
To calculate the company car tax, or BIK, multiply the P11D value by the BIK percentage banding, then multiply that figure by your tax band (20% or 40%). You do not get taxed if you are using a fuel card for business trips only.
The car fuel benefit charge is also subject to possible reductions for periods where the car is unavailable or is shared. A reduction may also be made where the benefit of free fuel is stopped part-way through the tax year. No fuel benefit charge can arise if an employer provides a facility to supply or directly supplies electricity for a car as HMRC does not regard electricity as a fuel.
To calculate taxable value, you can use commercial payroll software or HMRC's company car and car fuel benefit calculator.
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'Private use' and tax
If your employer provides your company car and you use it full time, you will need to pay the company car fuel benefit. 'Private use' includes employees' journeys between home and work, unless they are travelling to a temporary place of work.
The car fuel benefit charge is calculated by multiplying the fuel benefit charge multiplier by the car's 'appropriate percentage'. The appropriate percentage is the CO2 emissions-derived percentage used to calculate the car benefit charge, including any diesel supplement. The fuel benefit charge multiplier can change each year and is controlled by HMRC. For the 2023/2024 tax year, the multiplier was £27,800.
For example, if your BIK (Benefit-in-Kind) percentage was 25%, as your petrol vehicle falls into the 105-109 CO2 emissions bracket, you would multiply 0.25 (25%) by 27,800 to reach £6,950. This figure is then reduced by multiplying it by your tax margin, which is typically either 20% or 40%.
The fuel benefit charge is subject to possible reductions for periods where the car is unavailable or is shared. A reduction may also be made where the benefit of free fuel is stopped part-way through the tax year. No fuel benefit charge can arise if an employer provides a facility to supply or directly supplies electricity for a car as HMRC does not regard electricity as a fuel.
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BIK tax calculation
If you drive a company car, you may be liable to pay a Benefit-In-Kind (BIK) tax, also known as a "company car tax". This is because your employer is providing you with a non-cash benefit in addition to your regular salary, and BIK tax ensures that you pay tax on your full compensation package. The amount of BIK tax you pay depends on the value of the benefit and your personal tax rate.
The first step in calculating your BIK tax is to determine the value of the benefit, which is the published or market value of the car. The next step is to calculate the BIK percentage, which is set by the tax authorities and depends on the type of benefit. You can find the BIK percentage for different types of benefits on the government's BIK tax rates table. This percentage is based on a few key factors about the car, including the list price (the original price the car was sold for, brand new, including any extras), the car's emissions, and the fuel type. Electric cars, for example, have the lowest tax rates.
Once you have the value of the benefit and the BIK percentage, you can calculate the BIK value by multiplying the benefit's value by the BIK percentage. Finally, you apply your personal income tax rate to get the BIK tax amount. The income tax rate will be either 20% (basic rate), 40% (higher rate), or 45% (additional rate).
It is important to note that the amount of tax you pay for a company car is not linked to the amount of fuel you use. Additionally, drivers of electric cars do not have to pay fuel benefit tax if their employer pays for charging used for personal mileage.
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Fuel benefit charge multiplier
The fuel benefit charge multiplier is a key component in calculating the car fuel benefit charge. This multiplier is applied to the car's "appropriate percentage", which is derived from its CO₂ emissions percentage used to calculate the car benefit charge, including any diesel supplement.
For example, if a car has an appropriate percentage of 20%, and the fuel benefit charge multiplier for the given tax year is £24,100, then the fuel benefit charge would be £4,820 (20% of £24,100).
The fuel benefit charge multiplier is subject to periodic adjustments. For instance, from 6 April 2019, the multiplier was increased to £24,100, up from £23,400 in the previous year. These adjustments are typically made to keep pace with inflation and sustain public finances.
It's important to note that the fuel benefit charge can be reduced or even brought down to nil under certain conditions. For instance, if an employee reimburses the full cost of private fuel, or if the company car is shared or unavailable for a portion of the year. Additionally, if an employer provides electricity for a car, no fuel benefit charge arises as HMRC does not consider electricity a fuel.
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Reductions and exemptions
There are several ways to reduce or exempt yourself from the car fuel benefit charge. Firstly, if the employee is required to pay for all private fuel and does so, the fuel benefit charge is reduced to nil. This can be done by reimbursing the employee at cost or by using HMRC's Advisory Fuel Rates.
Secondly, a proportionate reduction is made if the company car is only available for part of the year, where private fuel is stopped part-way through the year, or where the benefit of the car is shared. For example, if the car is unavailable for a period or is shared, the charge may be reduced.
Thirdly, there is currently no fuel benefit charge for cars powered by electricity. Since 6 April 2018, there has been no taxable benefit where electricity is provided for an electric company car. This is because HMRC does not regard electricity as a fuel.
Finally, the government has applied a nil rate of tax to zero-emission vans within the van benefit charge since April 2021. This measure maintains the environmental signal by increasing charges in line with inflation.
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Frequently asked questions
If your employer pays for your company car and you use it full time, you'll need to pay the company car fuel benefit.
The fuel benefit charge is calculated by multiplying the fuel benefit charge multiplier by the car's appropriate percentage; that is the CO₂ emissions-derived percentage used to calculate the car benefit charge, including any diesel supplement. For the 2023/2024 tax year, the car fuel benefit charge multiplier is £27,800.
You can calculate the taxable value using commercial payroll software or HMRC's company car and car fuel benefit calculator.
