Repaying employers for private fuel

Company car drivers should be giving consideration to the issues raised in this article if they are provided with fuel for private mileage by their employers.

With no repayment to compensate for private fuel provided, employees will suffer a significant car fuel benefit in kind charge. Depending on the type of vehicle you drive the annual car fuel benefit charge could be between £1,105 and £8,177; if you pay tax at the basic rate this would add between £221 and £1,635 to your annual tax bill.

It’s worth comparing this tax charge with the cash cost of reimbursing your employer for private mileage.

To do this multiply the private mileage you have logged (or estimate that you will use) in the tax year 2015-16 by the approved advisory fuel rate for your vehicle as published by HMRC. These generally change every three months.

Let’s say that you drive a 1600cc petrol engine car with a fuel scale charge of £4,000. The current advisory fuel rate for this vehicle type is 14p per mile.

In the above example, if your private mileage is up to 5714, (and you are a basic rate tax payer) it will pay you to reimburse your employer as the cash cost of the payment will be less than the benefit in kind tax charge. (£5714 x 14p = £800)

If you are a higher rate tax payer the argument for a repayment of private mileage is even more compelling.