Company car tax explained - Is free fuel worth it?

If you also receive free fuel as part of your employment, you will need to pay tax on it.

It is calculated not using the car's value, but rather the notional sum, set by the tax office, of £14,400 and applying your carbon dioxide-determined rate of income tax to that figure.

This system does mean you must carefully calculate what you pay to ensure having free fuel is really a benefit.

For instance, if you don't drive far each year and you have a car with a high carbon dioxide figure, you may be better off without the free fuel benefit.

How to work out your fuel tax
1.    Work out your tax liability percentage based on the car's carbon dioxide emissions.
2.    Take this percentage and multiply it by £14,400.
3.    Multiply the figure you get by your tax rate (22% or 40%) to calculate your annual tax bill.