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BiK Tax on Free Fuel

BIK tax on ‘free fuel’

Provision of free fuel for private mileage has faced repeated attempts to curtail it during the last 10 years. It has resulted in a very small percentage of employees being offered the perk, with recent estimates putting the figure at about three per cent. From April 2010, the fuel benefit charge multiplier is set at £18,000.

Mike Moore, a director in the employment taxes group at Deloitte, said: ‘will have the effect of increasing the breakeven private mileage by 6.5% for an average 130g/km car and 10.5% for an average 180g/km car.

‘A basic rate taxpaying employee receiving free private fuel will have to travel more than approximately 6,570 private miles in the lower emitting car and 7,710 private miles in the higher emitting car for the tax cost of the benefit to be lower than the cost of the fuel used.

‘A higher rate taxpaying employee receiving free private fuel will have to travel more than approximately 13,140 private miles in the lower emitting car and 15,430 private miles in the higher emitting car for the tax cost of the benefit to be lower than the cost of the fuel used.

‘Even where the employee does benefit by taking free fuel, the employer is almost certainly better off by withdrawing the benefit and paying extra salary such that the employee is not left out of pocket.’

BIK tax is also paid on fuel private mileage on light commercial vehicles at a flat rate of £550 from April 2010.

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Comments

  • Ian mcdonnell - 04/12/2014 10:04

    Sometimes it is better for an employee to take the free fuel, even at a small loss as, the time taken to fill in the mileage allowance, company vs private, costs more in man hours than the fuel in the first instance.

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