Taxation of Employment Benefits in Kind: Cars, Fuel, and Vans

The following table outlines the applicable percentages for the 2025-26 tax year:

Note: The maximum taxable benefit for any car is capped at 37% of the list price.

Additional Rules and Adjustments

There are three critical adjustments to keep in mind when calculating car benefits:

• Diesel Supplement: A 4% supplement is added to the percentage for diesel cars, unless the vehicle meets the RDE2 standard.
• Time Apportionment: If the car is not available for the entire tax year, or if it is off the road for more than 30 consecutive days, the benefit must be reduced proportionately.
• Running Costs: If an employee pays toward the running costs of the car (such as maintenance or insurance), this reduces the taxable benefit. However, note that this rule specifically excludes fuel.

Fuel Provided for Private Use

If an employer also provides fuel for the employee's private use, this constitutes a separate and additional taxable benefit.

The calculation for the fuel benefit does not use the car's list price. Instead, it uses the same percentage that was applied to the car benefit, but that percentage is applied to a fixed annual amount set by the tax authorities.

For the 2026-27 tax year, the fixed amount is $£29,200$.

Exam Tip: If an employee pays for all private fuel themselves, there is no fuel benefit. However, if they only pay for part of the fuel, the benefit is not reduced. You must apply the full calculation based on the fixed amount.

Van Benefits

Vans are treated differently from cars. Rather than using a list price and a CO2 percentage, van benefits are calculated using fixed annual amounts.

For the 2026-27 tax year, the rules are as follows:

• Standard Van Benefit: The taxable benefit is $£4,170$.
• Zero-Emission Vans: If the van produces zero emissions, the benefit is nil ($£0$).
• Private Fuel in Vans: If the employer also provides private fuel for the van, an additional benefit of $£798$ is applied, unless the employee fully reimburses the cost of the fuel.

Just like car benefits, if a van is not provided for the entire tax year, these fixed amounts must be reduced proportionately.

Summary Worked Example

To consolidate these concepts, consider the following scenario for the 2026-27 tax year:

Scenario: An employee is provided with a car with a list price of $£30,000$ and accessories costing $£2,000$. The car's CO2 emissions are 72g/km. The employee contributes $£1,000$ toward the car's purchase. The employer also provides fuel for private use.

Step 1: Calculate the Adjusted List Price $\begin{aligned} \text{List Price} &= £30,000 \\ \text{Accessories} &= + £2,000 \\ \text{Employee Contribution} &= - £1,000 \\ \hline \text{Adjusted List Price} &= £31,000 \end{aligned}$

Step 2: Calculate the Car Benefit The CO2 emission of 72g/km falls into the 70–74g/km bracket, which carries a 21% rate. $\text{Car Benefit} = £31,000 \cdot 0.21 = £6,510$

Step 3: Calculate the Fuel Benefit Using the 21% rate applied to the 2026-27 fixed amount of $£29,200$: $\text{Fuel Benefit} = £29,200 \cdot 0.21 = £6,132$

Total Taxable Benefit in Kind: $£6,510 + £6,132 = £12,642$