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Guide
Van Fuel Allowance
The guide to van fuel allowance breaks down all you need to know as an employee about reimbursement rates and VAT/BIK, whether you have a company van or are on a van allowance.
Employee Guide To Car Fuel Allowance
Our simple guide to car fuel allowance breaks down everything you need to know about reimbursement rates, company cars, car allowances, and car fuel Benefit-In-Kind Tax (BIK).
Car Fuel Reimbursement Rates
The HMRC provides annually updated suggested fuel reimbursement rates for cars known as AMAP (Approved Mileage Allowance Payment) rates and AFR (Advisory Fuel Rate) rates.
The suggested reimbursement rates differ depending on whether the employee is using a company car or car allowance (in which case the AFR rate should be used), a car allowance or their own personal car (which in both instances, the AMAP rate should be used).
Whilst most employers pay the HMRC approved rates, they are not legally compelled to do so. If your employer chooses to pay you less than the approved rate, you can claim tax relief on the difference in your annual tax return. If, however they choose to pay you a higher rate, you will need to pay PAYE on the additional amount given to you.
Company Cars
If you’re using a company car, the relevant reimbursement rate is the AFR (Advisory Fuel Rate). The rates apply to petrol, diesel and hybrid vehicles, but not to electric (as electricity is not perceived as a road fuel type). Moreover, if an electric company vehicle is charged at your place of work, this does not attract benefit in kind (BIK) tax for either you or your employer, provided the employer pays directly for the charging.
This rate recommends how much you should be reimbursed for the cost of any fuel you have paid for. The AFR rate differs depending both on the type of engine and the vehicle’s engine size.
You can find out more about current AFR rates here at the HMRC site:
https://www.gov.uk/government/publications/advisory-fuel-rates/advisory-fuel-rates-from-1-march-2016
Car Allowance and Driver-Owned Cars
If the vehicle is personally owned by you the employee, the relevant reimbursement rate is the MAP rate. This reimbursement rate is slightly higher than that recommended for a company car (which is the AFR rate), because the MAP reimburses not only for fuel but for some on-road driving costs as well. The current MAP rates are 45p per mile for the first 10,000 miles, and 25p per mile for any subsequent mileage.
The rates apply to all vehicles including electric cars (unlike with AFR rates which do not apply to electric vehicles).
You can find out more about these rates here at the HMRC site: https://www.gov.uk/expenses-and-benefits-business-travel-mileage/rules-for-tax
Car Fuel Benefit-In-Kind Tax (BIK)
When offering to pay for your fuel, employers can offer to pay either for business-only fuel/mileage or for all fuel/mileage (i.e. both business and private use).
Combined Private and Business Use Fuel
If your employer pays (to any degree) for your private fuel, and this is not paid back to them, a benefit in kind (BIK) tax known as Car Fuel Benefit Tax is payable by you the employee (in the form of Class 1A National Insurance contributions) on the private-use element.
Similarly, if your employer gives you a company fuel card and you do not repay the private usage element, you will need to pay Fuel Benefit Tax on the private-use amount.
Also, important to note is that if you are given a fuel allowance that covers private as well as business fuel for only part of the year, then you will still have to pay Fuel Benefit Tax for the entire year.
Accepting an employer’s offer to pay for all of your private-business fuel may not always be in your best interests, however. We recommend you calculate whether the benefit of having them pay your private-use fuel is worth you having to pay the extra in tax every month, as sometimes, the extra tax you’d have to pay can be higher than if you’d paid for the private-use fuel yourself.
The HMRC issues a ‘Company Fuel Benefit Charge Multiplier’ figure to help employees calculate the amount of Fuel Tax Benefit they’d need to pay in this situation. This multiplier figure invariably changes each year but for the year 2021/2022 this figure is £24,500.
To calculate your Company Fuel Tax Benefit Charge payable for the year, take this figure (£24,100) and multiply it by the banding for the vehicle’s CO2 emissions (including any diesel penalty or supplement). You then multiply this figure by your usual rate of tax (20% or 40%).
For example:
£24,500 (the Company Fuel Benefit Charge Multiplier) x 30% (our hypothetical vehicle’s emissions banding) = £7350x 40% (the employee’s tax rate) = £2940 payable by the employee in Company Fuel Tax Benefit per annum or £245 per month in tax
Once you know the amount of tax you’d have to pay on a fuel allowance, you can then compare this figure against your average private-use fuel bill to see whether the allowance would save you any money.
Business-Only Fuel
If your employer pays only for your business fuel (not for your private fuel), neither you, nor they, will have to pay any Fuel Benefit Tax (i.e. benefit in kind or BIK) on it.
Employers can reclaim VAT on reimbursements made to employees, but only for business mileage (not for private mileage). To be able to do this, you will need to provide your employer mileage record (and fuel invoices if using a fuel card).
If you'd like to speak with our friendly team about business vehicle leasing, simply call 0118 920 5130 or email us at: enquiries@selectcarleasing.co.uk
We've got business car leasing covered from every angle
If you're thinking about business car leasing, we have a collection of informative guides on all aspects of business leasing to make the process as simple as possible.
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Guide
Company Cars
If you’re an employee being offered a company car or van, then congratulations because it can be a great practical benefit. However, before you say ‘yes’, make sure you take the time to understand what it means for you, your finances and responsibilities, so read on.
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Guide
Car Allowance
If you’re an employee being offered a car allowance, you may be wondering ‘what’s involved?’ Well this guide explains everything you need to know, including your responsibilities, the benefits and consideration points, as well as up-to-date information on how a car allowance will impact you financially.
