Save money on petrol
Many employers continue to provide fuel along with company cars (to around half a million employees according to recent figures), although this approach is often not economic to the employer or employee. With a scale charge of between 15% and 35%, calculated on the fixed sum of £14,400, many employees would be better off paying for all of their private fuel rather than suffering a tax charge of 22% or 40% depending on their individual circumstances.
If your company continues to provide all of the fuel for company cars then take a careful look at each employee’s circumstances to see whether a switch to a business mileage basis is worthwhile. This could also include you if you are a director of the company.
Under this system, business fuel would be paid for on a mileage basis between 7p and 16p per mile, depending on the car’s engine size and fuel type (see below). Input VAT may also be reclaimed by the business.
Car fuel advisory rates (per mile) from 1 July 2005
|
| Engine size: |
Petrol |
Diesel |
LPG |
| Up to and including 1,400cc |
10p |
9p |
7p |
| 1,401cc to 2,000cc |
12p |
9p |
8p |
| Over 2,000cc |
16p |
13p |
10p |
By making the switch, an employer not only saves the actual private fuel cost but also 12.8% Class 1A NI on the benefit to the employee as well. If the employee’s fuel costs are similar to the tax on the benefit in kind, then employers may want to share the overall savings with the employee with a small pay rise.
| Do not be put off by the fact that we are part way through a tax year. You do not have to wait for the 5 April to implement this change. |
Alternatively the business could pay for all fuel and the employee could reimburse the cost of private mileage. This method can be complicated and requires good record keeping, so please contact us before you change your policy.
If we can help you review your circumstances and procedures in this area generally, please get in touch. The only thing we cannot do is save you money at the pumps too!