How is fuel benefit calculated for company cars?
Answered 17 March 2026
Fuel Benefit for Company Cars
What the law says
Trigger for the charge Where fuel is provided for a car by reason of an employee's employment, and the employee is chargeable to tax in respect of the car under s.120 or s.120A ITEPA 2003, the cash equivalent of the fuel benefit is treated as earnings from the employment for that tax year.
"Fuel provided" is defined broadly and includes: discharge of any liability for fuel, use of a non-cash voucher or credit-token to obtain fuel or money spent on fuel, or payment of any sum in respect of fuel expenses.
Important: Fuel for zero-emission cars (those that cannot in any circumstances emit CO₂) is excluded from the charge entirely.
The calculation formula (s.150 ITEPA 2003) The cash equivalent = the appropriate percentage × £28,200 (the fixed statutory multiplier).
The "appropriate percentage" is the same CO₂-based percentage used to calculate the car benefit charge itself (determined under ss.133–142 ITEPA 2003).
When the cash equivalent is nil (s.151 ITEPA 2003) The charge is reduced to nil if either:
- Condition A: the employee is required to, and does, make good to the provider the whole of the expense of private fuel, on or before 6 July following the tax year; or
- Condition B: the fuel is made available only for business travel.
Proportionate reduction (s.152 ITEPA 2003) The cash equivalent is proportionately reduced if, for any part of the tax year:
- the car is unavailable (using the same definition as for car benefit);
- the fuel facility is not available;
- the fuel is made available only for business travel; or
- the employee is required to, and does, make good the cost of all private fuel for that part of the year.
However, any such partial-year condition is disregarded if there is a later time in the year when none of those conditions is met.
Reduction for shared cars (s.153 ITEPA 2003) If the car benefit cash equivalent is reduced under s.148 ITEPA 2003 (shared car reduction), a corresponding reduction is made to the fuel benefit cash equivalent.
HMRC guidance / practice
When the charge is triggered The fuel benefit charge applies automatically whenever any fuel is provided for a car that attracts a car benefit charge — it does not matter whether the fuel is used for private or business purposes. The charge is in addition to the car benefit charge.
The basic calculation The cash equivalent for a full tax year is the fixed statutory sum (£28,200 for the current year) multiplied by the same appropriate percentage used for the car benefit charge. The appropriate percentage includes all supplements and reductions (e.g. for diesel or alternatively fuelled vehicles).
Proportionate reduction formula HMRC applies the formula (CE × (Y − D)) ÷ Y, where CE is the full-year cash equivalent, Y is the number of days in the tax year, and D is the total number of days the car is unavailable or after fuel is finally withdrawn.
Making good private fuel An employee can avoid the charge by making good the full cost of private fuel. This can be done by direct payment, salary deduction, or replacing the fuel from their own pocket. HMRC will normally accept an employer's statement that employees are required to, and do, make good private fuel costs.
Class 1A NICs The fuel benefit charge also attracts Class 1A NICs, calculated on the same cash equivalent figure used for income tax purposes.
Summary example
A car with an appropriate percentage of 20%:
- Full-year fuel benefit = £28,200 × 20% = £5,640
Citation sources
Part 3 Employment income: earnings and benefits etc. treated as earnings Chapter 6 Taxable benefits: cars, vans and related benefits Car fuel: benefit treated as earnings Car fuel: calculating the cash equivalent 150 1 The cash equivalent of the benefit of the fuel is the appropriate percentage of £28,200 . 2 The “ appropriate percentage ” means the appropriate percentage determined in accordance with sections 133 to 142 for the purpose of calculating the cash equivalent of the benefit of the ca
Part 3 Employment income: earnings and benefits etc. treated as earnings Chapter 6 Taxable benefits: cars, vans and related benefits Car fuel: benefit treated as earnings Benefit of car fuel treated as earnings 149 1 If in a tax year— a fuel is provided for a car by reason of an employee’s employment, and b that person is chargeable to tax in respect of the car by virtue of section 120 or 120A , the cash equivalent of the benefit of the fuel is to be treated as earnings from the employment for t
The car fuel benefit charge is incurred as detailed at EIM25510. The cash equivalent of the car fuel benefit charge is reduced in proportion to the days in the year for which the car is unavailable. The reduction is in proportion to the number of days in the tax year (366 for leap years) and exactly matches the reduction in car benefit for periods when the car is unavailable (that is, the reduction at step 7 of the method statement in section 121(1) ITEPA 2003). The same definition of unavailabl
The amount of Class 1A NICs due on fuel provided for use in a car which attracts a car benefit charge is calculated using the fuel benefit scale rates applied for tax purposes under section 149 ITEPA 2003. Guidance on calculating fuel benefits is contained at EIM25500. Where an employer pays a mileage allowance see NIM16178 or round sum allowance see NIM16179.
Where any fuel is provided for a car that attracts a car benefit charge, the car fuel benefit charge will automatically apply (see EIM25510) unless the employee shows that either condition A or condition B in Section 151 ITEPA 2003 is met (see EIM25555). For the meaning of private use and business travel see EIM23305. Where the employee is required to make good the cost of all fuel provided for private use this may be done by: payment - that is by paying the employer a sum of money either direct
Car fuel benefit is incurred whenever: any fuel is provided (see EIM25515), whether or not for private use for a car that attracts a car benefit charge (see EIM23015 onwards). The charge is in addition to the relevant car benefit charge. Note that car fuel benefit is not incurred if either of the above conditions is not met, that is if either: the car does not attract a car benefit charge, or no fuel at all is provided for any purpose. For this purpose, car has the meaning given at EIM23100. So
Part 3 Employment income: earnings and benefits etc. treated as earnings Chapter 6 Taxable benefits: cars, vans and related benefits Car fuel: benefit treated as earnings Car fuel: reduction of cash equivalent 153 If a reduction of the cash equivalent of the benefit of the car for which the fuel is provided is made under section 148 (reduction of cash equivalent where car is shared), a corresponding reduction is to be made in relation to the cash equivalent of the benefit of the fuel.
The cash equivalent for a full tax year is calculated by multiplying: a fixed sum, set for each tax year by Section 150(1) ITEPA 2003 (see EIM25580) by the same appropriate percentage used at step 5 of the method statement in Section 121(1) ITEPA 2003 to calculate the car benefit charge. Relevant guidance on the car benefit charge and the appropriate percentage starts at EIM24500. The appropriate percentage calculated from a notional CO2 emissions figure agreed under EIM23765 (years to 2008/09)