The cost of taking free fuel rises

Changes to the company car tax free fuel benefit for the 2008/09 tax year make the cost of the benefit-in-kind increasingly marginal.

As the Chancellor has raised the free fuel benefit multiplier from £14,400 to £16,900 for 2008/09.

It means company car drivers should consider if the free fuel perk still remains a worthwhile benefit.

The free fuel benefit is calculated by multiplying £16,900 against the taxable percentage rate based of the car’s CO2 emissions. This figure is then multiplied by standard tax rate of either 20% or 40%.

For example, the driver of a petrol business car with CO2 emissions of 180g/km faces a £297 tax increase for taking free fuel (assuming they pay tax at 40%).

That means the driver will need to cover private mileage during the month equating to £135 worth of fuel at current prices to ensure it remains a benefit.

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