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Fuel benefit in kind is a taxable benefit applied when an employer provides fuel for an employee’s private use in a company car.
This benefit is subject to income tax and reported to HMRC.
Applies to private fuel use in company cars
Separate from company car benefit in kind
Taxable via PAYE or through self-assessment
Calculated using HMRC’s annual multiplier
Reported on the employee’s P11D form
Fuel benefit in kind (BIK) is triggered when an employee receives free fuel from their employer for private use—this includes journeys such as commuting or weekend travel. Even if only a small amount of fuel is used for personal purposes, the full benefit is chargeable unless the employee reimburses all private fuel costs in full.
To calculate the fuel benefit in kind, HMRC sets a fixed figure called the fuel benefit charge multiplier (for 2025/26, this is £27,800). This figure is multiplied by the same BIK percentage used to assess the company car, based on its CO₂ emissions and fuel type.
For example, a diesel car with a 25% BIK rate would attract a fuel benefit of £6,950 (i.e., 25% of £27,800).
The tax due depends on the employee’s income tax band. For higher earners, this can result in a significant annual cost, even if only a small amount of private fuel is used—making it essential to review whether the benefit is truly worthwhile.
Fuel benefit in kind is calculated using a standard method set by HMRC. To determine the taxable value of this benefit, you multiply the fuel benefit charge multiplier (a fixed figure that changes annually) by the BIK percentage assigned to the company car. The BIK percentage is based on the car’s CO₂ emissions and fuel type.
For example, in the 2025/26 tax year, the fuel benefit multiplier is £27,800. If your company car has a BIK percentage of 20%, your fuel benefit in kind would be £5,560 (i.e., 20% of £27,800). This figure is then taxed according to your personal income tax rate (e.g., 20%, 40%, or 45%).
It’s important to note that fuel benefit in kind is a flat-rate charge—you pay the same tax whether you use a lot of private fuel or very little. This can make it expensive for employees who don’t do much personal mileage. Keeping accurate mileage logs and reviewing private fuel use regularly can help determine if it's financially worthwhile to accept the benefit.
If you’re an employee who receives free fuel for private use from your employer, you are liable to pay income tax on the fuel benefit in kind. This applies even if you use the fuel for only occasional personal journeys. The benefit is classed as a non-cash perk and is treated as additional taxable income by HMRC.
Your employer will report this benefit on your annual P11D form, and you may either see the tax deducted through your PAYE code or need to declare it via your self-assessment tax return.
Employers also pay Class 1A National Insurance contributions on the value of the benefit, so there’s a cost to both parties. If you reimburse all private fuel costs to your employer, the benefit is removed, and no tax is due.
The key is that private fuel includes commuting and any non-business travel. If your company only provides fuel for business use, and this is well documented, you won't incur a fuel benefit in kind charge.
Yes, fuel used strictly for business journeys can be excluded from the fuel benefit in kind charge. According to HMRC, business mileage includes trips made wholly and exclusively for work purposes, such as travelling between offices or attending client meetings.
To avoid triggering a fuel benefit in kind charge, both the employer and employee must ensure that:
The company fuel is not used for any private travel, including commuting
Accurate mileage logs are kept to separate business from private use
Private mileage is either not allowed or fully reimbursed by the employee
If these conditions are met, no tax is due. HMRC may request evidence of mileage logs, fuel receipts, and policies proving that fuel is not available for personal use.
It’s important to be aware that even minimal personal use—such as driving to the shops—can result in the full benefit charge being applied for the entire year. Employers should have clear policies in place, and employees should keep thorough records to demonstrate compliance and avoid unnecessary tax.
Employees can avoid paying fuel benefit in kind by ensuring that either no fuel is provided for private use or by reimbursing the full cost of any private mileage to their employer. HMRC requires that the reimbursement covers the entire cost of private fuel—not just an estimate.
Here’s how to avoid the charge:
Do not accept fuel for personal use
Reimburse private fuel costs in full using HMRC’s approved mileage rates
Keep detailed mileage records for all business and private travel
Inform your employer promptly if you stop using fuel for private journeys
Even one private trip can trigger the benefit for the full tax year, unless full reimbursement is made. For many employees with low private mileage, the cost of the tax can exceed the value of the fuel used.
Employers should regularly remind employees of the rules and offer alternatives, such as paying for business-only fuel or mileage allowances. By managing this benefit carefully, employees can avoid unnecessary tax charges and maintain compliance with HMRC rules.
In many cases, fuel benefit in kind is not cost-effective for employees who do minimal private driving. The tax is based on a flat-rate calculation—you pay the same amount regardless of how much or how little private fuel you actually use.
For example, if your fuel benefit in kind is calculated at £6,000, and your income tax rate is 40%, you'll pay £2,400 in tax—even if you’ve only used £500 worth of private fuel. This means low-mileage drivers may be financially worse off accepting the benefit.
To assess whether it’s worth it, compare:
The actual cost of fuel used privately
The tax you’d pay on the benefit
The administrative burden of tracking fuel and reimbursing usage
In many cases, it may be more cost-effective to pay for your own private fuel or reimburse your employer in full to avoid the tax charge altogether.
Always run the numbers and seek advice from a tax adviser or use HMRC’s company car and fuel calculator before deciding.
Charging an electric vehicle (EV) does not usually trigger a fuel benefit in kind charge, but it depends on who pays for the electricity and where the charging occurs.
According to HMRC guidance:
Charging at a workplace provided by the employer is not treated as a benefit in kind, even if used for private journeys.
Charging at home, where the employer reimburses the electricity cost, may be considered a taxable benefit unless it falls under other exemptions.
Using a company charge card to pay for public charging could result in a benefit in kind if used for private mileage.
It’s important to note that HMRC does not class electricity as fuel, so traditional fuel benefit in kind rules don’t apply directly to electric vehicles. However, other benefit in kind rules may still apply based on how the electricity is provided.
To remain compliant, keep records of how and where charging occurs, and consult a professional accountant or tax adviser if you receive any reimbursements for home charging.
The fuel benefit in kind multiplier for the 2025/26 tax year is £27,800, as set by HMRC. This figure is used in the calculation of fuel benefit in kind for employees who receive free fuel for private use in a company car.
To calculate the taxable benefit, multiply the fuel benefit multiplier by the company car’s BIK percentage, which is determined by the vehicle’s CO₂ emissions and fuel type. The resulting value is then taxed at the employee’s marginal income tax rate (20%, 40%, or 45%).
Company car BIK rate: 30%
Fuel multiplier: £27,800
Taxable fuel benefit: £8,340
Tax due for higher-rate taxpayer (40%): £3,336
This flat-rate charge applies regardless of how much private fuel is actually used, making it potentially expensive for low-mileage users. The multiplier is reviewed annually by HMRC, and it typically increases in line with inflation.
Employers and employees should check the latest figures each tax year and assess whether the benefit still offers value. HMRC also provides an online company car and fuel calculator to help with these calculations.
For company car drivers, fuel benefit in kind can significantly increase their overall tax liability, especially for those in higher income tax bands. The benefit is treated as additional income and is subject to tax based on the driver’s marginal rate.
Receiving free fuel for private use might seem attractive, but the tax cost can be considerable. This is particularly true for drivers with low personal mileage. Since the benefit is calculated using a flat-rate multiplier, the tax due doesn’t decrease with lower fuel usage.
Many drivers find that the actual value of the fuel they receive is less than the tax they pay, making it more cost-effective to decline the benefit and pay for private fuel themselves.
Employers must also consider their costs. The fuel benefit in kind increases the employer’s Class 1A National Insurance contributions, making it more expensive to provide.
In summary, company car drivers should evaluate their private mileage and tax position each year and consider reimbursing fuel or using mileage allowance payments instead.
Yes, an employee can cancel out the fuel benefit in kind charge by fully reimbursing their employer for the cost of private fuel. This must be done using HMRC’s advisory fuel rates (AFRs) or actual fuel cost, and the full amount must be repaid to avoid a tax charge.
The reimbursement should be:
Made promptly and regularly, ideally monthly or quarterly
Based on accurate mileage logs of private journeys
Paid in full by the end of the tax year
Even if you miss reimbursing just a portion of private fuel, the full benefit in kind charge will apply for the entire year. HMRC does not accept partial reimbursements.
Employees should keep detailed records, including dates, mileage, and fuel prices, and employers should issue clear guidance and request supporting documentation to validate the repayments.
Reimbursing private fuel is a common and accepted way to avoid the fuel benefit in kind, especially for employees with low private usage who wish to avoid the disproportionate tax cost.
Yes, fuel benefit in kind must be reported on the employee’s P11D form each tax year by the employer. This form details all taxable benefits an employee receives, including company cars and private fuel provision.
The P11D must be submitted to HMRC by 6 July following the end of the tax year, and employees receive a copy to review and check for accuracy. The value of the fuel benefit is calculated using HMRC’s fuel multiplier and the car’s BIK percentage.
This reported amount is then used by HMRC to adjust the employee’s tax code or inform self-assessment tax calculations. If any of the details are incorrect—such as the fuel no longer being provided mid-year—it’s important to notify the employer and correct the records.
For employers, submitting accurate P11D forms ensures compliance and avoids potential penalties. For employees, reviewing the form can help identify whether continuing with the fuel benefit in kind is cost-effective for the next tax year. You can ensure that this is submitted accurately and on time by consulting with a professional.
If an employee stops receiving private fuel part-way through the tax year, the fuel BIK for companies is apportioned based on the number of days the fuel was provided. HMRC allows a pro-rata calculation when the benefit is withdrawn, but clear documentation is required.
For the fuel benefit to officially end:
The fuel must no longer be available for any private use
The employer must record the date it ceased
The employee must not use any further private fuel beyond that point
In some cases, the employee may need to reimburse private fuel costs up to the cessation date
For example, if the employee had use of private fuel from 6 April to 30 September, the fuel benefit would apply for that portion of the year only.
Employers must ensure this change is reflected on the P11D form, and employees should keep accurate mileage records. Failure to stop private fuel use completely—even for one journey—can result in the full annual charge still applying.
While they are closely related, car benefit in kind and fuel benefit in kind are two distinct taxable benefits. Both apply when an employee receives a company car or fuel for private use, but they are calculated and taxed separately by HMRC.
The use of a company car
Taxed based on CO₂ emissions, fuel type, and list price
Applies whether or not fuel is provided
The provision of fuel for private journeys
Calculated using HMRC’s fuel multiplier and the same BIK percentage
Taxable in addition to the car benefit
An employee can receive one without the other. For example, you may have a company car but pay for all your own fuel—so only the car benefit applies.
Understanding the difference helps when assessing the total cost of a company car package. In many cases, declining the fuel benefit can reduce your tax bill significantly, especially if you drive minimal private miles.
No, properly managed pool cars do not trigger a fuel benefit in kind charge, either for the vehicle or for fuel. However, to qualify as a pool car, HMRC has strict rules that must be met.
A car is considered a pool car if:
It is used by multiple employees
It is not allocated to any one individual
It is kept on business premises overnight
Private use is prohibited, except for journeys that are incidental to business travel
Fuel provided for pool car use is also exempt from benefit in kind taxation, provided it meets the above criteria and is not used for personal journeys.
Employers should maintain robust usage logs, policies, and vehicle tracking to prove pool car status if challenged by HMRC. If the car is found to have been used privately or allocated informally to an employee, the full car and fuel benefit in kind charges may apply, including backdated taxes and penalties.
Yes, fuel benefit in kind can apply to plug-in hybrid vehicles, but not typically to fully electric vehicles, as electricity is not classed as a fuel under HMRC rules.
For plug-in hybrids, if an employer pays for fuel (petrol or diesel) used for private mileage, this is treated the same way as for conventional cars, and the fuel benefit in kind charge applies. The calculation uses the standard fuel multiplier and the car’s BIK rate based on CO₂ emissions.
However, fully electric vehicles are different. Since electricity is not treated as fuel, there is no fuel benefit in kind for electricity used to charge the car. That said, if an employer reimburses the cost of home or public charging, this may be considered a separate benefit in kind, depending on how it’s provided.
To avoid unintended tax charges, both employers and employees should clarify who pays for charging, where charging occurs, and ensure that appropriate documentation and expense policies are in place.
Handling fuel benefit in kind (BIK) calculations internally may seem straightforward—but without expert oversight, it exposes both employers and employees to serious risks. Here are the key issues we see time and again:
| Risk | Explanation |
|---|---|
| Incorrect BIK Calculations | Misapplying the HMRC multiplier or BIK percentage can result in underpaid or overpaid tax. This may trigger penalties or unexpected tax bills. |
| Failure to Pro-Rata Fuel Benefits | If fuel provision ends mid-year and isn't properly apportioned, HMRC may apply the full annual benefit—costing more than necessary. |
| Lack of Mileage or Reimbursement Records | HMRC requires clear proof that private fuel has been repaid in full. Inadequate or missing logs can lead to the full benefit being charged. |
| Misclassification of Company Cars or Fuel Type | Incorrectly categorising vehicles—especially hybrids or electric vehicles—can result in compliance issues and reputational damage. |
| P11D Reporting Errors | Late, missed, or incorrect reporting of BIK values can lead to HMRC penalties, investigations, and backdated tax liabilities. |
But there is one way to totally avoid these risks. (Read next section.)
At Pulse Accountants, we specialise in navigating complex areas of tax compliance—especially when it comes to fuel benefit in kind. Our expert team offers proactive, hands-on support to ensure your business stays compliant while saving time and money.
Here’s how we help:
Accurate Fuel BIK Calculations
We apply the correct HMRC rates and CO₂-based BIK percentages, factoring in any changes mid-year to avoid costly miscalculations.
Ongoing Mileage Review & Reimbursement Tracking
We implement smart systems to record and validate mileage logs, reimbursement schedules, and advisory fuel rates—so nothing slips through the cracks.
Tailored Advice for Electric and Hybrid Vehicles
Our in-depth knowledge of how HMRC treats EVs and plug-in hybrids ensures you avoid accidental tax exposure.
P11D Preparation & Submission
We take care of your P11D reporting with complete accuracy and on time—removing stress and reducing your risk of penalties.
Strategic Planning
We review whether providing fuel is cost-effective and recommend better alternatives where appropriate, saving you and your employees money.
Working with Pulse means peace of mind, expert advice, and full compliance—without the administrative burden.
When it comes to fuel benefit in kind, Pulse Accountants combines technical expertise with a personal approach that delivers clarity, confidence, and control. We’re not just number crunchers—we’re trusted advisers who understand the fine line between tax efficiency and compliance.
Here’s why clients choose us:
✔ Specialist expertise in BIK and HMRC compliance
✔ Personalised support for businesses and employees
✔ Accurate reporting and tax-saving strategies
✔ Transparent fees and no surprise costs
✔ Ongoing advice as tax rules evolve
Whether you’re a business owner managing a fleet, or an individual employee navigating the complexities of company car tax, we help you stay one step ahead.
Ready to stop worrying about fuel benefit in kind compliance? Let Pulse Accountants take care of it—so you can focus on what you do best.
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