An effective tax rate of 310% on a benefit-in-kind? What could possible justify that – a Lamborghini? A helicopter? How about free private fuel in a diesel VW Passat….

The Government’s intentions with private fuel in a company car are clear – they’d like you to stop providing it! To help you do this they’ve been increasing the charge rapidly year on year.

With private fuel there is a “double whammy” because they increase the charge in two ways: – The CO2 % for the car goes up in line with the escalator (and as the car is retested under WLTP, etc); and – They increase the fixed annual amount that the scale chare % is applied to.

The result is that, for the current tax year, an employee could pay an effective tax rate well in excess of 300% on the private fuel for a VW Passat 2.0 diesel doing 10,000 private miles a year.

For this to make any sense for the employee (i.e. for the tax to be less than the value of the fuel) they’d need be doing more than 30,000 private miles a year. For it to be cost effective for the employer the private mileage would need to be over 80,000!

Almost 1 in 6 company car drivers still takes private fuel. Buying out or removing this ‘benefit’ can save both employee and employer a fortune.