Fuel Card Benefit-in-Kind vs 45p Mileage Claim: Which Is Cheaper in 2026/27?

How the Fuel Card Benefit Works

When an employer provides fuel for a company car that is also used privately — commonly via a fuel card — HMRC taxes this as a separate benefit from the company car charge itself: the Car Fuel Benefit Charge. This is calculated by applying the same CO2-based percentage used for the company car benefit to a fixed annual figure set by HMRC each tax year, regardless of the car's actual list price or how much private fuel was genuinely used.

The critical feature of this charge is that it is fixed — a driver who uses £200 of private fuel a year pays exactly the same fuel benefit tax as a driver in an identical car who uses £2,000 of private fuel a year, provided both have any private fuel paid for by the employer at all.

Worked Example: Fuel Card vs Reimbursing Your Own Fuel

Scenario: company car with a 25% BIK percentage, higher-rate (40%) taxpayer, modest private mileage of 4,000 miles/year

• Fuel benefit charge: 25% x the fixed annual fuel benefit multiplier — for illustration, if the multiplier is around £28,200, the taxable benefit is £7,050
• Tax on this benefit at 40%: £2,820/yr
• Employer also pays 15% Class 1A NI on the same benefit: £1,058/yr (an employer cost, not a direct employee cost, but it affects the overall economics of offering the card)

Alternative: employee pays for their own private fuel

• Actual private fuel used (4,000 miles at, say, 45mpg and £1.55/litre): roughly £570
• No fuel benefit charge applies, because the employer isn't paying for any private fuel
• The employee pays £570 out of pocket instead of £2,820 in tax on a benefit — a clear saving of over £2,000 a year at this mileage level

This illustrates why fuel cards used only for modest private mileage are usually poor value once the fixed benefit charge is taken into account — the tax cost frequently exceeds the actual value of fuel consumed.

When a Fuel Card Makes Sense

The economics flip for genuinely high-private-mileage drivers. Because the fuel benefit charge is fixed regardless of usage, an employee who does significant private mileage — long personal journeys, second-home travel, extensive family use of the car — may find the fixed tax charge is actually cheaper than what they'd otherwise spend on fuel out of pocket. The break-even point depends on the car's BIK percentage, fuel type and the driver's tax rate, but as a rule of thumb, private mileage needs to be relatively high (often 8,000+ miles a year) before a fuel card becomes genuinely worthwhile.

Company Car Drivers: Advisory Fuel Rates for Business Mileage

Company car drivers who pay for their own fuel (having declined the fuel card, or where the employer doesn't provide one) can claim back the cost of business mileage from their employer using HMRC's quarterly Advisory Fuel Rates, which vary by engine size and fuel type and are set to reflect actual average running costs. These reimbursements are tax-free provided they don't exceed the advisory rate.

Employees Using Their Own Car: The 45p Rate

Employees who use their own personal car for business journeys (rather than a company car) claim under a completely different system: the Approved Mileage Allowance Payment (AMAP), currently 45p per mile for the first 10,000 business miles in a tax year and 25p per mile after that. This rate is designed to cover fuel plus wear, insurance and depreciation combined, and is tax-free up to these limits — if an employer pays less than the AMAP rate, the employee can claim Mileage Allowance Relief on the shortfall via Self Assessment.