Company Fuel Tax Explained

Company Fuel Tax Explained

Employers need to report fuel usage of employees during use back to HMRC. Here is a brief guide into company fuel tax.

Company cars are an enticing incentive for employees of companies, and as well as being a great way of getting to work, they can be used in their spare time.

But with companies sometimes providing fuel as well, both need to be reported to Her Majesty’s Revenue and Customs (HMRC) to see how much tax needs to be paid.

Vehicles and fuel used for private purposes need to be reported to HMRC for tax and National Insurance reasons – while time spent in the car for work should be covered by your company.

So what needs to be reported, and how do you go about it?

fuel usage

In terms of seeing what tax you should pay, both private car and fuel usage should be recorded and reported to HMRC separately on a P11D form – with both being paid through Class 1A for National Insurance on the value of either car or fuel benefit.

To keep a track of what you spend, make sure you hold onto receipts and the original vehicle forms, as the value of benefit can be worked out for both.

If you have worked out the distances undertaken during company use, you can also work out the Advisory Fuel Rates depending on the vehicle’s engine size and distance covered:

Engine size                  Petrol - amount per mile       LPG - amount per mile

1400cc or less            12 pence                                  8 pence

1401cc to 2000cc       15 pence                                 10 pence

Over 2000cc               22 pence                                 15 pence


Engine size                  Diesel - amount per mile

1600cc or less            10 pence

1601cc to 2000cc       12 pence

Over 2000cc               14 pence

fuel usage

These rates are subject to change due to the price of fuel per litre and the applied MPG used by the government. Companies then have to report this to HMRC to be taxed on it.

Electric vehicles come with an Advisory Electricity Rate of 4 pence per mile, but isn’t a fuel for car fuel benefit purposes.

Employers also need to pay National Insurance on some other motoring costs that are considered add-ons, such as parking permits, drivers, toll bridge fees and congestion charges – but servicing and insurance don’t come under this.

Looking for your next company car? Take a few options from our 10 best fleet cars to drive in 2019! 

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