Toyota Avensis
A Toyota Avensis diesel would incur a benefit in kind charge of £3196 if a company car tax driver took free fuel, representing a tax bill of £639 for a 20% tax payer and £1278 for a 40% tax payer
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Toyota Avensis
A Toyota Avensis diesel would incur a benefit in kind charge of £3196 if a company car tax driver took free fuel, representing a tax bill of £639 for a 20% tax payer and £1278 for a 40% tax payer

Author: Matt Morton

The Government multiplier for calculating the tax due on employer-provided ‘free’ fuel for private use in a company car rises from £18,000 to £20,200 from April 6, 2012. For 2013/14, the multiplier will rise by RPI plus 2%.

So how do you calculate your tax liability if you reeive the ‘free’ fuel benefit? This is what you need to know:

  • The car’s combined fuel consumption and BIK tax percentage
  • The price of fuel used
  • The driver’s marginal tax rate and Government multiplier figure

Example:

Let’s take a Toyota Avensis 2.0 Diesel. This has CO2 emissions of 119 g/Km and a combined fuel consumption of 62.8 mpg. With its CO2 emissions, the company car tax percentage rate is 17% in 2012/13.

So we then take the fuel scale charge of £20,200 and multiply it by 17% which equals £3,196. This is the benefit which you then multiply by your marginal rate of tax to arrive at how much tax you will pay:

  • £639 (20%)
  • £1,278 40%)

Right, let’s assume the average price of diesel is £6.59/gallon (£1.45/litre), so that £639 will pay for 97 gallons at the 20% tax rate or 194 at the 40% tax rate. Thus break even mileage is 97 x 62.8 = 6092 private miles for a 20% tax payer; for a 40% tax payer it’s 12,183 private miles.

If the number of private miles you cover is less than the calculated figure, then you really should consider not taking the free fuel benefit because it costs you more in tax.

Remember, if you take any free fuel at any point throughout the financial year then the free fuel benefit becomes liable for the whole year.

 

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