Understanding fuel taxation & legislation

15 March


As a business owner, you need to remain in the loop with legislation so you don’t end up bending the rules.

Consider company car management, for instance. When you have a fleet of business vehicles with multiple drivers, tax and road use laws are something you must know like the back of your hand.

At Allstar, we’re intimately aware of fuel taxation and road regulations – and we look to make this complex subject simple for small businesses. Here, we highlight the key points you need to be aware of, including how company cars are exempt from tax:

Tax on fuel in the UK

Tax on fuel is one of the biggest expenditures that fleet-reliant businesses have to deal with. Currently, the UK duty rate for both petrol and diesel fuel is £0.5796 per litre, with 20% Value Added Tax tagged on to this fuel and duty price.

Britain is the only country in Europe that enforces fuel duty on both petrol and diesel. Pre-tax, UK diesel is only the 22nd most expensive in the EU (24th for petrol). However, after tax this jumps to being just and impressive 2nd (or for petrol, 12th).

As you can see, most of the money businesses spend on petrol and diesel goes towards taxation rather than the fuel itself, but there are ways to save if you operate vehicles as part of your business.

Fuel rates for fleet vehicles

Most businesses that have a fleet are eligible to claim tax relief on fuel to reduce running costs. To do so, the total mileage completed by each vehicle must be reported to HMRC every year.

The current rates per vehicle are as follows:

  • Cars and vans – For the first 10,000 miles, 45p per mile. Over and above 10,000 miles, 25p per mile.
  • Motorcycles – 24p flat rate for every mile.
  • Bikes – 20p flat rate for every mile.

Company cars exempt from tax

Another way to save money on fleet management is by selecting company cars exempt from tax. These include:

  • Cars that employees own privately, paying for fuel out of their own pocket or reimbursing their employer within the same tax year.
  • Cars used exclusively for business travel – appointments and meetings – and never for personal journeys.
  • Cars for business travel that accommodate disabilities.
  • Pool cars for business travel where employees share rides into work.
  • Cars owned by an individually operated company e.g. a sole trader.
  • Cars given as a gift to a close relative (spouse, partner, son/daughter, son/daughter-in-law, parents, dependents, household guests) who work for you.

Fuel management is much easier with an Allstar card

Whatever company cars you own, one of the best ways to manage your fleet’s fuel consumption effectively is with an exclusive Allstar fuel card. Easy to use and simple to purchase, these cards ensure you remain on top of your spending, with a ready-made HMRC-friendly invoice produced, ready for you to send off at the end of each tax year.

Browse our range of cards today and chat to our helpful customer service team on 0345 266 5101 for more information.

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