How is company car tax calculated
Private fuel benefit
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Where an employee receives a company car and also receives free or subsidised fuel for private use, a further taxable benefit arises. Due to further tax rises in April 2008, the provision of private fuel is now very inefficient for employers to provide and should be withdrawn - for information on how to do this visit Intelligent Fleet here.
HOW TO CALCULATE THE TAX ON PRIVATE FUEL BENEFIT
Private fuel benefit is calculated in a similar manner to company car tax. A scale charge set by the Government (currently Ј16,900) is multiplied by the same percentage for CO 2 emissions as used to calculated the company car taxable benefit. As with company cars, specific tax breaks are available for vehicles with CO 2 emissions
below 120 g/km. The tax payable is therefore:
Ј16,900 x CO2 emissions percentage x employee tax rate
Example for 2008/09
Ford Mondeo 2.0 TDCi Zetec, CO 2 emissions 161 g/km, 40% taxpayer
Ј16,900 x 23% (per CO2 table) x 40% = Ј1,554.80 annual tax payable
Opting out of private fuel benefit
As demonstrated in the above example, the tax on private fuel benefit is quite punitive, especially if the employee does not travel many private miles. If the employee in the above example would not spend Ј1,554.80 on private fuel in a year then they would be better off by giving up the benefit.
Where private fuel is given up part way through a tax year, the taxable benefit is time-apportioned provided the benefit is not reinstated later in that tax year.
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