Tax and Travel

Car and fuel benefits

The taxable petrol and diesel car benefit is based on the car's CO₂ emissions. It is calculated using the car's UK list price and applying the 'appropriate percentage' as shown in the table below. The first line of figures in the table relate to the new category of qualifying low emissions cars (QUALECs).

The car fuel benefit is calculated by applying the same percentages to the fuel multiplier, which for 2008/9 is increased from £14,400 to £16,900.

The percentages are reduced for cars (except QUALECs) that can be driven on alternative fuels by:

• 2% for cars manufactured to be capable of being run on E85 fuel
• 2% for bi-fuel cars or those which run on LPG only
• 3% for hybrid electric and petrol cars
• 6% for electric only cars (in practice the taxable benefit will be 9% of the price).

VAT on fuel for private use in cars

Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT on a scale charge. The table below shows the VAT chargeable for quarters commencing on or after 1 May 2008.

Mileage rates

Changes to the HMRC business mileage rates are announced from time to time. The current rates are as follows:

The fuel only advisory rates can be applied as a tax-free maximum rate for employees claiming for petrol used on business journeys and for employees reimbursing their employers with the cost of petrol used for private journeys.

HMRC will consider claims for a higher maximum rate, if it can be demonstrated that it is necessary for an employee to use a car with higher than average fuel costs.

Car costs – VED rates

  * Cars registered before 23 March 2006
** Cars registered from 23 March 2006

Company vans

The taxable benefit for the unrestricted private use of vans is £3,000. There is a further £500 taxable benefit if the employer provides fuel for private travel.