IF YOU are supplied with free fuel for your company car, or as a director of a small business or SME you receive free fuel for your business car, the amount chargeable to income tax (for the driver) and Class 1A national insurance contributions (for the employer) rose following Budget 2011.
The free fuel multiplier increased from £18,000 to £18,800 (from 06 April 2011). So, is taking free fuel for your company car worth it? Here is how the free fuel benefit is calculated.
Multiply the £18,800 fuel multiplier (fuel benefit for 2011/12 tax year) by a percentage based on the rate at which the car emits carbon dioxide (CO2, in g/km). You can see the percentage banding you should use by referring to our company car tax table.
The example is based on a car with a list price of £24,000 when it was first registered and which emits carbon dioxide at a rate of 150g/km placing it in the 20% tax band (petrol) and 23% tax band (diesel).
The business cost of supplying free fuel – apart from the cost of the fuel itself – is the amount of employer’s Class 1A NIC contributions that are payable. This is calculated by multiplying the driver’s taxable benefit by 13.8% (raised from 12.8% as of April 2011) to provide the amount payable.
|Free fuel multiplier||£24,000||£24,000|
|Tax (20% taxpayer)||£960||£1104|
|Tax (40% taxpayer)||£1656||£2208|
|Employer’s Class 1A NIC||£662||£762|
NOTE: No fuel benefit is payable if you repay the cost of private fuel or if fuel is only provided for business journeys. The amount to be paid can be assessed by using the company car fuel rates, which is known as the Approved Fuel Rate (AFR). To work out which rate applies, click here: NEW company car mileage rates – valid from March 2011.