🇬🇧 BIK 2026/27
PLAIN-LANGUAGE GUIDE · FUEL BENEFIT 2026/27

The fuel benefit charge, explained kindly

“Free fuel” with a company car can be surprisingly expensive. The tax does not depend on how much fuel you actually use — it is a fixed figure times your car’s BIK rate. Here is how to check whether it is worth it.

Your company car

The example: Škoda Octavia 2.0 TDI 116, basic-rate taxpayer

List price £30,775, CO2 112 g/km, diesel meeting RDE2 (so no 4% supplement). Your employer pays for all fuel, including private miles.

  1. BIK rate: 112 g/km → 28% in 2026/27.
  2. Car benefit: £30,775 × 28% = £8,617 → tax at 20% = £1,723.
  3. Fuel benefit: £29,200 × 28% = £8,176 → tax at 20% = £1,635.
  4. Total: about £3,359 a year, or about £280 a month.

Is free fuel worth it?

The fuel benefit tax here is £1,635 a year at 20% (£3,270 at 40%). Divide it by the cost of fuel per mile to see how many private miles you would need to drive to break even.

Private miles a yearFuel cost at 16p a mileFuel benefit tax at 20%Fuel benefit tax at 40%
3,000£480£1,635£3,270
6,000£960£1,635£3,270
10,000£1,600£1,635£3,270
15,000£2,400£1,635£3,270

16p a mile is HMRC’s advisory fuel rate for a 1,601–2,000cc diesel from 1 September 2026, used here as a rough cost of fuel. Your real cost may differ.

At 20% you would need to drive about 10,200 private miles a year before free fuel beats paying for it yourself; at 40%, more than 20,000.

How to avoid the charge

Paying back just some of the private fuel does not reduce the charge — it is all or nothing.

The multiplier

Tax yearFuel benefit multiplier
2026/27£29,200
2027/28£30,200
2028/29 onwardsnot yet published

Model figures (CO2, engine size, list price) come from the manufacturer’s own UK price list, as on the main calculator. Prices change often — check the current list price for your exact version.

Business fuel is still fine

Your employer can pay for all your business fuel without any charge, as long as private fuel is not paid for. Many employers use a fuel card and ask you to repay private miles each month at the advisory fuel rate. For a 1,601–2,000cc diesel that is 16p a mile from 1 September 2026. If you drive 3,000 private miles a year, that would cost you £480 — much less than the £1,635 fuel benefit tax at 20%.

FAQ

How is the fuel benefit charge worked out?

£29,200 × your car’s BIK percentage. At 28% that is a £8,176 benefit, costing £1,635 a year at 20% or £3,270 at 40%.

What is the total tax on a Škoda Octavia 2.0 TDI with free fuel?

About £3,359 a year at 20%: £1,723 on the car and £1,635 on the fuel.

How do I avoid the fuel benefit charge?

Repay all fuel used for private journeys, usually at HMRC’s advisory fuel rates, or choose an electric car.

Sources: GOV.UK “Check future rates for petrol-powered and hybrid-powered company cars” (updated 30 Sep 2026); HMRC policy papers on appropriate percentages 2028–2030 and 2030–2032 (28 Oct 2026); HMRC EIM24710 (PHEV easement); GOV.UK van and fuel benefit charges 2026/27; CIPP (2027/28 fuel multiplier £30,200). Checked 5 November 2026.

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