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Company Car Fuel and Company Vans

When you provide a company car or van to your employees, any fuel you supply for private use creates an additional tax charge on top of the vehicle benefit itself. These fuel benefit charges apply even if the fuel is theoretically meant for business use only, unless specific conditions are met....

Company car fuel benefit charge

If you provide fuel for a company car, a fuel benefit charge applies automatically unless the employee pays back the full cost of all private fuel, or fuel is made available strictly for business travel only.

The car fuel benefit charge is calculated by multiplying a fixed sum by the car's "appropriate percentage" – the same percentage used to work out the car benefit charge based on the vehicle's CO2 emissions.

For 2025/26, the fixed sum is £28,200 (it was £27,800 for 2023 to 2025).

Example: An employee has a petrol car with CO2 emissions of 160g/km, first registered on or after 6 April 2020. The appropriate percentage for calculating the car benefit charge for 2021/22 is 36%. The car fuel benefit charge would be £24,600 × 36% = £8,856.

The fuel benefit charge covers all fuel provided for private use, including travel between home and work. Once this charge applies, you don't face an additional tax charge if you reimburse fuel costs or pay for fuel directly via credit card or vouchers – unless the reimbursement exceeds the actual cost, in which case the excess is taxable separately.

Avoiding the car fuel benefit charge

You can reduce the fuel benefit charge to nil if either:

The employee pays back all private fuel costs: The employee must be required to make good the entire cost of fuel used for private motoring (including commuting), and must actually do so
Fuel is only available for business travel: No private use of fuel is permitted at all

"Making good" means the employee either pays you money (directly or through payroll deduction) or replaces the fuel they used privately by purchasing fuel themselves.

For 2017/18 onwards, payment must be made by 6 July following the tax year in which the fuel was provided. For example, private fuel provided in 2025/26 must be paid back by 6 July 2026.

You can use HMRC's advisory fuel rates to simplify this process for company cars – these rates provide a recognised per-mile figure for fuel costs that can be used to calculate reimbursements.

Withdrawing private fuel during the year

If you stop providing free fuel partway through the tax year, the fuel benefit charge is reduced proportionately. You calculate this by adding together:

Days when the car was unavailable to the employee
Days after free fuel was withdrawn

However, if you provide free fuel again later in the same tax year, you lose this reduction entirely – the charge applies for the full year.

Company van benefit charge

The benefit charge for a company van is quite different from the car benefit system. For 2021/22 onwards, the standard van benefit charge is £3,500 (£3,490 for 2020/21).

However, the charge is nil if both these conditions are met throughout the year:

The van is only available for business travel and commuting, and is not used for any other private purpose except to an insignificant extent
The van is available mainly for the employee's business travel

"Insignificant" private use means use that is too small or unimportant to be worth consideration. It must be:

Insignificant in quantity across the whole tax year (a few days at most)
Insignificant in quality (a week's exclusive private use is clearly not insignificant)
Intermittent and irregular
Very much the exception rather than the pattern of use

Examples of insignificant use:

Taking rubbish to the tip once or twice a year
Making a slight detour to stop at a newsagent on the way to work
Calling at the dentist on the way home

Examples that are not insignificant:

Weekly supermarket shopping using the van
Taking the van away on a week's holiday
Using the van outside work for social activities

Zero-emission vans

If the van cannot emit CO2 by being driven (electric vans), the benefit charge is nil for 2021/22 onwards. Between 2015/16 and 2020/21, such vans had a reduced charge based on a percentage of the standard rate, rising from 20% to 80% over those years.

Van fuel benefit charge

A separate fuel benefit charge applies if you provide fuel for a company van, but only if the van benefit charge itself applies under the rules above.

If the van has nil benefit charge (because private use is insignificant or it's a zero-emission van from 2021/22 onwards), there's no fuel benefit charge either.

For 2025/26, the van fuel benefit charge is £769 (£757 for 2023 to 2025, £688 for 2022/23).

Like the car fuel benefit, you can reduce this to nil if:

The employee makes good all the cost of fuel for private use (including commuting) by 6 July following the tax year
Fuel is made available only for business travel

Shared vans

When a van is available to more than one employee at the same time for their private use, the benefit charge is calculated as follows:

1. First, work out the charge as if the van weren't shared

2. Then reduce each employee's charge on a "just and reasonable" basis

The total charges for all employees sharing the van should not exceed the cash equivalent if only one employee had used it.

Reductions and adjustments

Both car and van benefit charges (and their respective fuel benefit charges) are reduced proportionately if:

The vehicle is unavailable for 30 or more consecutive days
The vehicle is only available for part of the year
Employees make payments for private use of the vehicle (this reduces the vehicle benefit charge pound-for-pound, after any shared use reduction)

From 2017/18 onwards, payments for private use made before 6 July following the tax year count towards reducing the benefit charge.

Record keeping

You must keep records to support your P11D returns (or payrolled benefits calculations), including:

Each vehicle used by employees
If a van is shared, by whom and in what proportions
Periods of 30+ consecutive days when a vehicle was unavailable
Payments made by employees for private use

Where you declare a nil benefit charge, keep evidence that conditions were met in practice, such as the terms and conditions of vehicle availability and mileage records showing actual use.

Sources

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.

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