Carl Taylor Accountant and Business Consultant

Is company fuel benefit worth it?  Here’s how to find out.

Tax on company cars and fuel benefit is an arena of constant change – hardly a budget goes by without the chancellor playing with the tax on car and fuel benefits.  This means the parameters change every year, and it’s difficult to know whether the current arrangements for your employees are really the most tax efficient and most beneficial for your employee.

Fuel benefit occurs when an employer pays for private fuel (such as for travelling to and from work) for an employee.  The value of the benefit and the amount of tax an employee pays on private fuel depends on the emissions of the car and the type of fuel.

Providing private fuel is expensive, both for the employee and the employer.  This often means that the employee ends up paying more tax on the fuel benefit than the cost of the fuel itself.

If you get it wrong, the employee can end up paying more in tax than it would cost them to pay for their own fuel, and the employer can end up with an unnecessary expense of paying for fuel and employers NI on the benefit, when there is absolutely no benefit to the employee, because it would cost them less to pay for their own fuel anyway.

The question of whether it is ever worth providing private fuel to employees depends on multiple factors, including the employees level of private miles, their marginal tax rate, and the emissions of their vehicle, so we’ve come up with a quick calculator that tells you whether it is worth providing private fuel for your employee or not.