If you drive a company car and your employer pays for your fuel, including for personal use, you could be facing a sizeable tax charge unless you repay the private fuel element by 6 July 2025. Many company car users are unaware that unless they fully reimburse their employer for private fuel use, they will be taxed on a notional fuel benefit – even if the private mileage is relatively low.
This charge, known as the car fuel benefit charge, is based on a fixed figure set by HMRC for the tax year, multiplied by a percentage that reflects the car’s CO2 emissions. The result is added to your taxable income, which can push you into a higher tax band or increase your overall tax bill significantly.
For example, if your car has a 30% CO2 rating and the multiplier for the year is £27,800, the taxable benefit comes to £8,340. If you are a basic rate taxpayer, this adds around £1,668 to your tax bill. If you are a higher rate taxpayer, the additional tax could be £3,336 or more. This charge is triggered regardless of how little personal fuel was actually used unless full reimbursement is made.
What you need to do
To avoid this charge, you must reimburse the cost of private fuel used during the 2024/25 tax year to your employer by 6 July 2025. To calculate how much to repay, you need to:
- Keep a mileage log
The most accurate way to track private fuel use is by recording every journey in a logbook or using a digital mileage tracker. Each journey should note the date, reason, start and end mileage, and whether it was business or personal. - Calculate the cost using advisory fuel rates
HMRC publishes advisory fuel rates each quarter based on fuel type and engine size. Use the correct rate for the relevant period. For example, a petrol car with a 1600cc engine might have a rate of 15p per mile. If you drove 1,000 private miles, you would need to repay £150. - Pay the reimbursement by 6 July 2025
The reimbursement must be made in full and on time. Late or partial repayments will not prevent the benefit charge from applying.
Why this matters
Repaying the private fuel cost is often far more tax-efficient than accepting the benefit. The tax charge is based on a notional benefit that can easily exceed the real-world cost of the fuel actually used. By reimbursing only the cost of the fuel for private use, you avoid this artificial uplift in taxable income and ensure fairness.
Additionally, repaying private fuel helps avoid any scrutiny from HMRC and reduces the risk of disputes about benefit calculations. Employers also appreciate the clarity and reduced administrative burden when employees take responsibility for their own personal mileage.
In summary
If your employer pays for your private fuel, act now:
- Log your private mileage accurately for the 2024-25 tax year
- Use advisory fuel rates to calculate the amount to repay
- Reimburse your employer in full by 6 July 2025
Doing so ensures that you avoid an unnecessary tax charge and remain compliant with benefit-in-kind rules. This is one of the few opportunities when keeping good records and making a small repayment can lead to substantial tax savings.