A guide to fuel benefits and company car tax

A guide to fuel benefits and company car tax

Car Fuel Allowances
Car Fuel Allowances

There are lots of facts, figures, statistics and tables to look at when calculating the potential cost of running a company car, with the government regularly tweaking the system and changing the figures. Here’s our guide to fuel benefits and company car tax.

Fuel allowances

The amount of miles you cover each year will dictate how you work with the government fuel allowances system. Benefit in kind taxation will have to be paid by drivers that get their private mileage fuel paid for by their employer, up to £20,200, as of April 6 2012.

Depending on how much fuel your car uses and its official CO2 emissions figure will dictate how much tax will have to be paid to the Taxman each month. For example, if we use the BMW 320d EfficientDynamics model as a benchmark – a very popular company car with those business types trying to pay less tax every month – we can begin to work out some taxation figures.

The BMW 320d EfficientDynamics model enjoys a quoted combined economy of 68.9mpg and outputs 109g of CO2 for every kilometre it covers on the road. For the 2013 tax year, this more eco-friendly BMW would attract a tax percentage of 15 per cent.

So, to calculate the taxable value using the 320d as our test model, we work out 15 per cent of the £20,200 fuel benefit figure, which comes out at a taxable value of £3,030. We then multiply this value by the driver’s income tax rate and see a figure of £606 for a 20 per cent income tax rate payer, and £1,212 for a 40 per cent income tax rate payer. Using an average diesel fuel price of £6.59 per gallon – £1.45 per litre based on prices from March 2012 – we see that £606 would allow our fictional, 20 per cent tax-paying BMW 320d EfficientDynamics driver to buy some 91 gallons of diesel fuel. Our 40 per cent income tax-payer would be able to buy twice the amount of diesel fuel; some 183 gallons of the stuff.

Now we have to factor in the quoted combined fuel consumption for the most frugal 3 Series, the BMW 320d EfficientDynamics, which sits at a pretty impressive 68.9mpg, and gives our 20 per cent tax-payer a potential mileage from the 91 gallons of diesel fuel of 6,269 miles. Mr. 40 per cent tax-payer with his 183 gallons of fuel could hit a potential mileage of 12,608 miles, and these figures for each level of tax-payer represent the absolute minimum miles that they would need to cover each year to make taking out the fuel benefit and paying the tax on it worth while.

So, in short, if you drive less private miles each year than the figures we have just calculated it would be a better idea for you to pay for the private fuel yourself, whereas a driver that drives a great distance per year than calculated should pay the tax and take the fuel.

Company car tax

For 2013, company car tax will be worked out with a benefit in kind sliding scale percentage chart, with all diesel cars registered on or after January 1 2006 to be liable for a 3 per cent tax charge in 2013.

The maximum threshold for 10 per cent tax rate for company car tax is for cars emitting 99g/km or less of CO2, dropping further to 95g in April 2013 and 90g in 2014. Any contract hire cars will, of course, be subject to this taxation, so it’s a good idea to check your tax numbers out first.

If you want to calculate the potential tax rate for a specific car, then you’ll need to know its fuel type, CO2 emissions figure and P11D value. You can then use the government’s sliding scale percentage chart to work out the company car tax.