'Free' Fuel

As part of your benefits package, you may be offered free fuel for your company car. Although this may seem too good of an offer to turn down, it's worth remembering that nothing comes for free, and this 'free' petrol will be classed as a taxable benefit. Before accepting this offer, take some time to work out whether it would be cheaper for you to fill the tank yourself.

Since April 2003, the fuel benefit charge has been calculated by applying the appropriate company car tax percentage to a set figure known as the multiplier. The multiplier figure for 2006/7 is £14,400. The car's tax liability is based on the carbon dioxide (CO₂) emissions of your company car; find out how to work this out here .

Calculating the Cost

• Find out your car's tax liability (for example, a petrol car with a CO₂ emission of 180 g/km would be 23%).
• Multiply this percentage by the 'multiplier' set by the government (£14,440). So in our example, we would multiply £14,400 by 23%, giving a total of £3,321.
• Multiply this figure by your rate of income tax: 22% (basic) or 40% (higher rate) to find out your annual tax bill for 'free' fuel.
  For example: £3,321 x 22% = £730.
• Compare this figure with how much it would cost you to fuel the car for your own personal mileage. You could be better off paying for your own fuel rather than taking the 'free' fuel benefit and paying the tax. If buying your personal fuel works out less expensive than the tax, ask whether your employer will offer an additional salary contribution to compensate for you opting out of the fuel scheme.

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