The company car fuel benefit charge is a tax on employer-provided fuel used for private driving in a company car. For the 2025-26 tax year, HMRC sets the fuel benefit multiplier at £28,200, rising to £29,200 for 2026-27.1HM Revenue & Customs. Income Tax: Van Benefit Charge and Fuel Benefit Charges for Cars and Vans From 6 April 2025 That figure gets multiplied by a CO2-based percentage for your car to produce the taxable benefit value. The charge is all or nothing: one private mile on employer-paid fuel triggers the full annual amount, and it sits on top of the company car benefit itself. Both the employee (through income tax) and the employer (through Class 1A National Insurance) pay.
When the Charge Applies
The charge is triggered the moment your employer pays for any private driving in a company car. Private driving includes your daily commute from home to a regular workplace, which HMRC does not treat as business travel. It also covers weekend errands, holidays, school runs, and any journey that is not part of your job duties.
There is no proportional reduction for light personal use. One private trip on a company fuel card produces the same charge as 20,000 private miles that year. Section 149 of the Income Tax (Earnings and Pensions) Act 2003 treats any provision of fuel for private use as a taxable benefit for the whole tax year.2legislation.gov.uk. Income Tax (Earnings and Pensions) Act 2003 – 149 Benefit of Car Fuel Treated as Earnings The charge applies automatically whenever fuel is provided for a car that is available for private use, even if the fuel was nominally intended for business only.3HM Revenue & Customs. Employment Income Manual – EIM25515 – Car Fuel Benefit: Meaning of Provided
Precise mileage records are the only way to prove that company fuel was used exclusively for business. Without them, HMRC assumes private use, and the full charge stands.
How to Calculate the Benefit Value
The calculation has two ingredients: the fixed multiplier for the tax year, and a CO2-based percentage tied to your specific car.
For 2025-26 (6 April 2025 to 5 April 2026), the multiplier is £28,200. The CO2 percentage, called the “appropriate percentage”, comes from HMRC’s tables. Bands for 2025-26 run from 3% for fully electric cars up to a cap of 37% for vehicles emitting 155 g/km or more.4HM Revenue & Customs. Work Out the Appropriate Percentage for Company Car Benefits (480: Appendix 2) You can find your car’s CO2 figure on its V5C registration certificate.
Suppose your company car emits 97 g/km, placing it in the 25% band. The fuel benefit value is:
£28,200 × 25% = £7,050
A higher-emission car at 155 g/km or above hits the 37% cap:
£28,200 × 37% = £10,434
Neither figure is cash you receive. It is the amount HMRC treats as extra taxable salary, and it stays the same whether you drove 500 private miles or 15,000.
What Employees Owe
Your actual bill depends on your income tax rate. Using the £10,434 maximum for 2025-26:
- Basic-rate taxpayer (20%): £2,086.80 per year
- Higher-rate taxpayer (40%): £4,173.60 per year
- Additional-rate taxpayer (45%): £4,695.30 per year
HMRC usually collects the tax by adjusting your tax code, so it comes out of your monthly pay automatically. For a higher-rate taxpayer driving a cleaner car in the 25% band, the annual cost is £7,050 × 40% = £2,820.
What Employers Owe
The employer pays Class 1A National Insurance on the full benefit value. From April 2025, the Class 1A rate is 15%.5GOV.UK. Rates and Allowances: National Insurance Contributions This cost sits with the business and cannot be deducted from the employee’s wages.
On the £10,434 benefit value, the employer’s Class 1A bill is £1,565.10 per year for that single employee. Across a fleet the figures accumulate quickly.
Avoiding the Charge by Repaying Private Fuel
The fuel benefit charge drops to zero if you reimburse your employer for every mile of private driving. Every mile, every penny. If the reimbursement falls even slightly short, HMRC applies the full annual charge as though nothing had been repaid.
HMRC publishes Advisory Fuel Rates (AFRs) that give an accepted pence-per-mile figure by engine size and fuel type. As of the rates from June 2026, petrol cars in the 1,401cc to 2,000cc bracket are set at 17 pence per mile, and petrol engines over 2,000cc at 26 pence per mile.6HM Revenue & Customs. Advisory Fuel Rates The rates change quarterly to reflect pump prices, so check them regularly rather than relying on an older figure.
Repaying at or above the advisory rate for all private miles will not be challenged. If a car is particularly efficient, an employer may use a lower rate but only with evidence of the actual cost per mile; most stick with the published rates.
Thorough mileage logs are essential. Record the date, start and end locations, purpose, and mileage of every journey, and separate business from private trips. Without that documentation you cannot prove the reimbursement fully covers your private use.
Stopping the Benefit Part-Way Through the Year
If free fuel becomes too expensive, you can stop the benefit mid-year and receive a proportional reduction. Section 151 of ITEPA 2003 scales the charge by the number of days the fuel was actually provided, using the full-year charge divided by days in the tax year and multiplied by days the benefit was available.7legislation.gov.uk. Income Tax (Earnings and Pensions) Act 2003 – Car Fuel: Benefit Treated as Earnings
There is a serious trap. If you withdraw on, say, 1 August but then use the company fuel card for a single private trip the following January, the earlier reduction is lost entirely. The statute treats any later private use as wiping out the reduction, and the full annual charge applies from the start of the year again. Once you decide to stop, you must not slip back even once during the remainder of that tax year.
Electric and Hybrid Vehicles
Fully electric company cars are exempt from the fuel benefit charge. Section 149(4) of ITEPA 2003 excludes electricity from the definition of “fuel” for cars that cannot emit CO2 by being driven.8legislation.gov.uk. Income Tax (Earnings and Pensions) Act 2003 – Chapter 6 An employee can charge a fully electric company car at the workplace or use a company charge card at public chargers without triggering benefit-in-kind tax on the electricity.9GOV.UK. Expenses and Benefits: Company Cars and Fuel
The exemption does not extend to plug-in hybrids. A hybrid still burns petrol or diesel for part of its operation, so the fuel benefit charge applies to any liquid fuel provided for private use. Drivers of plug-in hybrids must follow the same reimbursement rules as drivers of conventional cars if they want to avoid the charge.
Employer Reporting and Deadlines
Employers must report the fuel benefit on form P11D by 6 July following the end of the tax year. For 2025-26, that means 6 July 2026. Late submission of the accompanying P11D(b) attracts a penalty of £100 per 50 employees for each month or part-month it is overdue, plus interest on any unpaid Class 1A National Insurance.10GOV.UK. Expenses and Benefits for Employers: Deadlines
Employers can skip the P11D route by registering to payroll the fuel benefit. The taxable value is then included in each pay period, with income tax deducted in real time through the Full Payment Submission.11GOV.UK. Tax Employees’ Benefits and Expenses Through Your Payroll This spreads the tax evenly across the year rather than hitting the employee through a lump-sum tax code adjustment, and it removes the annual P11D filing for any benefits payrolled. The Class 1A payment to HMRC still applies whichever reporting route the employer uses.