Comparison · Tax · 2026/27
Company Car Fuel Benefit vs Mileage Reimbursement UK 2026/27
Employees with a company car and free private fuel pay a fixed annual fuel benefit charge, regardless of how much they actually drive privately. Reimbursing only business mileage avoids that charge but means paying for your own private fuel. Here is how the two compare for 2026/27.
TL;DR - 30-Second Summary
- - Fuel benefit charge: fixed tax charge based on CO2 %; only good value with high genuine private mileage
- - Mileage reimbursement: claim only business mileage at HMRC advisory rates; pay for private fuel yourself
- - Electric company cars have no equivalent taxable benefit for employer-provided electricity
Who Should Choose What?
The fuel benefit can work if...
- - Your genuine private mileage is high (long personal journeys, family use)
- - You value not having to submit any fuel expense claims
- - Your car has a low CO2-based Benefit-in-Kind percentage
Mileage reimbursement usually wins if...
- - Your private mileage is modest
- - You are happy to log business trips and submit claims
- - You drive an electric or hybrid company car
Frequently Asked Questions
What is the company car fuel benefit charge?
If your employer pays for fuel used on private mileage in a company car, you are taxed on a fixed "fuel benefit" — calculated as the car's CO2-based Benefit-in-Kind percentage applied to a fixed fuel benefit multiplier set by HMRC each tax year, regardless of how much fuel you actually use privately.
What is mileage reimbursement instead of a fuel card?
Rather than the employer paying for all fuel, you (or the company) claims back only the fuel cost of business mileage, either using HMRC's Advisory Fuel Rates (for company cars) or the AMAP rates if using your own car, and you pay for your own private fuel personally — avoiding the fuel benefit charge entirely for company cars.
When is the fuel benefit charge worth it?
The fuel benefit charge is normally only worthwhile if your genuine private mileage is high, because the tax charge is fixed regardless of how much private fuel you actually use. For most drivers with modest private mileage, the tax charge on the benefit exceeds the value of the free private fuel — HMRC and most tax advisers agree it rarely pays off unless private mileage is substantial.
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Can I opt out of the fuel benefit part-way through the tax year?
Yes, employers can typically withdraw free private fuel provision, at which point the fuel benefit charge stops from that point (calculated pro-rata), provided you then either pay for your own private fuel or reimburse the employer for private fuel costs in full.
How does this compare for electric company cars?
There is no equivalent taxable fuel benefit for electricity provided by an employer for a company electric car, making free workplace or employer-funded charging effectively tax-free for the employee — a further reason the EV vs private fuel calculation differs sharply from petrol or diesel.
Which option is simpler to administer?
A fuel card with the fuel benefit charge is simpler for the employee (no expense claims), while mileage reimbursement requires logging business trips and submitting claims but avoids an often poor-value fixed tax charge — many employers now default to mileage reimbursement rather than a fuel card for this reason.
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Disclaimer: This is educational information, not tax advice. Fuel benefit multipliers, Benefit-in-Kind percentages and Advisory Fuel Rates are updated regularly — always check current figures at gov.uk/expenses-and-benefits-fuel-for-company-cars before deciding.
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