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Company car fuel benefits

If you use a company car you needs to check if it is worthwhile for the company to pay for the fuel or whether it would be more tax efficient to pay for the fuel yourself and claim a mileage allowance.

For example, a company car with a CO2 factor of 183 would give you a fuel benefit for the year to 5th April 2006 of £3,312. The tax cost and equivalent private mileage is as follows:-

Your highest tax rate 22% 40%
Tax tax cost of the benefit £729 £1,325
Equivalent private mileage 5,593 10,166


If your annual private mileage is under these mileages for your tax rate, then it is cheaper to pay for the fuel yourself and claim a mileage allowance for the business mileage that you have driven.

The tax free mileage allowance for a car in respect of the year to 5th April 2006 is as follows:

First 10,000 miles 40p per mile
Over 10,000 miles 25p per mile


If you would like to know more about these tax savings contact David Cane on 020 8390 6878.



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