Car fuel benefits for employees

The car fuel benefit rules only apply to company cars that attract a car benefit tax charge. This means the rules do not apply to fuel provided for use in an employee’s own car.

However, employers can pay up to 45p per mile for company related trips in an employee’s own car. If these journeys clock up more than 10,000 miles in any tax year, the rate per mile drops to 25p. As long as the above rates are applied any mileage expenses paid will be tax-free. If rates paid are higher, any excess will be taxed as a benefit. Conversely, if an employer pays less than the approved rates the employee can claim the difference against their tax bill.

Where employees are provided with fuel for their own private use by their employers in a company car, the car fuel benefit charge is applicable. The fuel benefit charge is determined by reference to the CO2 rating of the car, applied to a fixed amount.

The fuel benefit is not applicable when the employee pays for all their private fuel use. This is known as ‘making good’. Private fuel includes the fuel used commuting to and from work. Employees should keep a log of private mileage and can then use the published advisory fuel rates to repay the cost of fuel used for private travel back to their employer. For the 2021-22 tax year, the employer must be reimbursed for private fuel use by 6 July 2022.