The offer of free fuel for your company car seems too good for many drivers to resist. However, nothing comes for free and it’s also classed as a taxable benefit. So how can you work out if it’s worth filling the tank yourself instead?
- Work out your car’s tax liability as you would for company car tax purposes. We’ll take a figure of 18% as an example.
- Take this percentage and multiply it by £14,400, a notional figure set by the taxman: £14,400 x 18% = £2592.
- Multiply this by your rate of income tax (22% or 40%) to calculate your annual tax bill for ‘free’ fuel: £2592 x 22% = £570.
- Compare this figure with how much it would cost you to fuel your own car for your expected annual mileage. If personal fuel works out more expensive than the tax, ask whether your employer will make an additional salary contribution to compensate for you opting out of the fuel scheme.