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Fuel for private use – what do employees pay in tax?

The amount of tax paid by employees on private fuel provided with a company car is now running at a high level based on the cash equivalent of the benefit each tax year. Those with low private mileage may find it’s no longer a benefit. That’s why many employers have put in place different options, such as no longer paying for fuel with company fuel use reclaimed or continuing to pay for fuel but having employees reimburse them for private usage. That way, the employee is not liable for the private fuel tax charge, where this would in all likelihood be higher than the value of the actual fuel used. Should you want advice on policy decisions about employee fuel and the tax implications then we’d be glad to advise you.

Guide to Company Car and Van Tax

If an employee is provided with a car by their employer, tax is payable on the cash equivalent of the of car provided. The cash equivalent of the company car provided is calculated by taking the list price of the car, multiplied by a certain percentage, this percentage depends on the amount of carbon dioxide emitted by the car.

Company Cars

If an employee is provided with a car by their employer, tax is payable on the cash equivalent of the of car provided.

The cash equivalent of the company car provided is calculated by taking the list price of the car, multiplied by a certain percentage, this percentage depends on the amount of carbon dioxide emitted by the car.

The list price of the car is calculated using the following formula:

£

List price when new                                                                                A

Add Accessories (over £100)                                                                 B

Less: Employee contribution (max £5,000)                                          (C)

Revised List Price                                                                                  D

This revised list price is then multiped by the appropriate percentage as per the table below:

2018/19 2019/20
g/km CO2 Petrol % Diesel % (+4%) Petrol % Diesel % (+4%)
0-50 13 17 16 20
51-75 16 20 19 23
76-94 19 23 22 26
95-99 20 24 23 27
100-104 21 25 24 28
105-109 22 26 25 20
110-114 23 27 26 30
115-119 24 28 27 31
120-124 25 29 28 32
125-129 26 30 29 33
130-134 27 31 30 34
135-139 28 32 31 35
140-144 29 33 32 36
145-149 30 34 33 37
150-154 31 35 34 37
155-159 32 36 35 37
160-164 33 37 36 37
165-169 34 37 37 37
170-174 35 37 37 37
175-179 36 37 37 37
180-184 37 37 37 37
185-189 37 37 37 37
190+ 37 37 37 37

37% is currently the maximum percentage that can be applied to the list price of the company car to calculate the cash equivalent of the benefit.

From 2018/19 if diesel cars are RDE2 standard then no additional percentage will be added to percentage figure.

As you can see from the table above HMRC are increasing the relevant percentages up to 2019/20.

From 2020/21 the rules will be reformed, and percentages will be reduced for ultra-low emission cars, we will provide an update regarding these rules closer to the time of their introduction.

We have identified below the tax an employee provided with a company car throughout a full tax year could expect to pay on four different models of vehicles in the 2018/19 and 2019/20 tax years:

BMW i3:

  • Fuel Type: Zero Emission
  • Approximate market value: £34,075
  • CO2 Emission Figure: Zero
2018/19 2019/20
‘Cash Value’ of company car as calculated using rules noted above £4,429.00 £5,452.00
Taxed @ 20% £886.00 £1,090.00
Taxed @ 40% £1,772.00 £2,181.00
Taxed @ 45% £1,993.00 £2,453.00

 

Audi A4 Saloon (1.4 TFSI)

  • Fuel Type: Petrol
  • Approximate market value: £29,180
  • CO2 Emission Figure: 122g/km
2018/19 2019/20
‘Cash Value’ of company car as calculated using rules noted above £7,295.00 £8,170.00
Tax per year if pay at @ 20% £1,459.00 £1,634.00
Tax per year if pay at @ 40% £2,918.00 £3,268.00
Tax per year if pay at @ 45% £3,282.00 £3,676.00

 

Land Rover Discovery Sport (Pure 2.0 eD4 150hp (5 seat) 5d)

  • Fuel Type: Diesel
  • Approximate market value: £28,195
  • CO2 Emission Figure: 123 g/km
2018/19 2019/20
‘Cash Value’ of company car as calculated using rules noted above £8,176.00 £9,022.00
Taxed @ 20% £1,635.00 £1,804.00
Taxed @ 40% £3,270.00 £3,609.00
Taxed @ 45% £3,679.00 £4,060.00

 

Volkswagen Passat (S TSI 1.4 125 PS 6 speed man)

  • Fuel Type: Petrol
  • Approximate market value: £22,025
  • CO2 Emission Figure: 123 g/km
2018/19 2019/20
‘Cash Value’ of company car as calculated using rules noted above £5,506.00 £6,167.00
Taxed @ 20% £1,101.00 £1,233.00
Taxed @ 40% £2,202.00 £2,467.00
Taxed @ 45% £2,478.00 £2,775.00

Vans

There is an income tax charge for an employee or a director who is provided by their employer or company with a company van that is made available for private use.

There is no tax charge for employee or employer where private use is insignificant, or the van is only used privately for commuting in and out of work.

The tax charge is the employee’s marginal rate of tax (i.e. 20%, 40% or 45%) times the benefit for the year in question, as outlined in the table below:

Year 2018/19 2019/20
Cash Benefit £3,350.00 £3,430.00
Taxed @ 20% £670.00 £686.00
Taxed @ 40% £1,340.00 £1,372.00
Taxed @ 45% £1,507.00 £1,543.50

There are special rules for zero emissions vans, however these are beginning to be tapered down, the current cash benefit for low emission van’s is as below:

Year 2018/19 2019/20
Cash Benefit £1,340.00 £2,004.00
Taxed @ 20% £268.00 £400.80
Taxed @ 40% £536.00 £801.60
Taxed @ 45% £603.00 £901.80

By the 2022/23 tax year the van benefit charge for zero emission vans will be identical to regular vans.

What can be considered a ‘van’ for tax purposes?

These are the criteria that HMRC uses to classify a vehicle as a goods van:

  • A vehicle primarily constructed for the conveyance of goods or burden;
  • A gross vehicle weight, fully laden, not exceeding three and a half tonnes

The key term in this definition is “constructed.” In short, it is not the actual use of the vehicle, but the purpose for which it was constructed and sold that matters.

For a vehicle to class as a van there are certain structural criteria that should be met:

  • The vehicle should have a significant load bay to carry goods such that the carrying of passengers can no longer be the main purpose;
  • The load bay of the vehicle must not have windows

Double Cab pickups will qualify as a van if its cargo capacity/payload is over 1 tonne. A payload means the vehicle’s gross vehicle weight less its unoccupied kerb weight.

We have listed some of the Double Cab pickups that may qualify as a van within the above definition below:

  • Volkswagen Amarok
  • Nissan Navara
  • Ford Ranger
  • Isuzu D-Max
  • Mitsubishi L200

Provision of Fuel for Employees

Employees will be taxed on fuel provided by their employers for private use. The employee will be taxed on the cash equivalent of the benefit each tax year. The fuel benefit is fixed each year, according to the table below.

Tax Year Fixed Figure
2018/19 £23,400.00
2019/20 £24,100.00

The fuel benefit charge is calculated by taking the appropriate percentage, as worked out for car benefit purposes and multiplying by the fixed figure. The tax amount is then calculated by applying the individuals marginal rate of tax to the fuel benefit charge amount.

For example, if an employee was provided with fuel for private use for a Volkswagen Passat (as above) company car the tax would be as follows:

Tax Year Fixed Figure Relevant % Taxable Amount 20% 40% 45%
2018/19 £23,400.00 25% £6,552.00 £1,310.00 £2,621.00 £2,948.00
2019/20 £24,100.00 28% £6,748.00 £1,349.60 £2,699.20 £3,036.60

In the Autumn Budget 2017, the Chancellor announced that from 6 April 2018 no benefit in kind will arise where fuel is provided for an electric car.

Where an employee is provided with fuel for a van for private use the benefit charge is a flat rate each tax year as below:

Tax Year Fixed Figure
2018/19 £633.00
Taxed @ 20% £127.00
Taxed @ 40% £253.00
Taxed @ 45% £285.00
Tax Year Fixed Figure
2019/20 £655.00
Taxed @ 20% £131.00
Taxed @ 40% £262.00
Taxed @ 45% £295.00

If you would like any assistance or have any questions regarding any of the topics discussed above please do not hesitate to contact Amy Armitage (amy@hbaccountants.co.uk) or any other member of the HB Accountants team on 01992 444466.

(please note figures have been rounded to the nearest pound)

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