13/08/2026
🚗 Company cars, vans and fuel – what you need to know for tax purposes
If your company has cars, vans or trucks used by the director or employees, it's important to know how to correctly tax and report this to HMRC. Otherwise, you risk a penalty or interest for incorrectly declared benefits.
1. Company car for personal use = taxable benefit (Benefit in Kind)
If an employee or director can use a company car for reasons other than work (e.g. shopping or holidays), this benefit is treated as a taxable addition to their salary. The amount depends on the car's list price, CO2 emissions and fuel type. Legal basis – ITEPA 2003, section 120.
Reported via:
P11D form (once a year, by 6 July), or
Payrolling – taxed directly through payroll each month (requires registering with HMRC in advance, before the start of the tax year).
2. Fuel for personal use – a separate charge
If the company pays for all fuel (including personal journeys), this is calculated separately from the car benefit, using a fixed HMRC multiplier (fuel benefit multiplier) rather than actual costs. Legal basis – ITEPA 2003, section 149. The charge applies even if only a small amount of personal mileage is driven – there's no threshold.
It's often cheaper to reimburse employees only for business mileage driven, rather than paying for all fuel. The confirmed HMRC rate (AMAP) is 55p per mile for the first 10,000 business miles per year, then 25p per mile after that. If actual personal fuel costs are lower than the fixed benefit charge, mileage reimbursement usually works out cheaper than paying for all the fuel.
3. Vans and trucks – different rules
This is particularly relevant for transport companies: vans and trucks are taxed differently from cars, under ITEPA 2003, sections 155–164 and 168. A fixed rate applies, regardless of CO2 or price.
Important points:
Zero-emission (electric) vans are not subject to the benefit charge at all, regardless of the level of personal use
For other vans, the benefit charge can be avoided if personal use meets strict conditions (e.g. driving home with work tools is generally not treated as personal use)
If fuel is provided for personal use, an additional fixed van fuel charge applies
4. Records you must keep
A mileage log – for every journey, record the date, route (from/to), purpose, and distance travelled. Best recorded straight after each journey (by hand, in an Excel sheet, or via an app such as MileIQ)
Fuel receipts
Vehicle purchase or lease agreements
Records of who used the vehicle and when
Without proper records, it's difficult to prove during an HMRC check that a vehicle is used for work only – this can lead to additional tax being charged retrospectively.
🔔 Upcoming changes – what to be aware of now
📅 From April 2027 – mandatory payrolling of benefits
HMRC has confirmed that from April 2027, taxing all benefits in kind (including car and fuel benefits) through payroll will become mandatory. The P11D form will no longer be the default reporting method. If you currently use P11D, we recommend starting to prepare for the transition now – setting up your payroll system, informing employees, and testing everything in advance, as this kind of change takes time.
📈 Fixed amounts have increased for the 2026/27 tax year
Car fuel benefit multiplier: £29,200 (up from £28,200)
Van benefit charge: up to £4,170
Van fuel benefit charge: £798 (up from £769)
These amounts are uprated annually in line with inflation, so it's worth checking the latest rates each year before calculating employee benefits.
📞 Not sure whether your company's vehicles are being declared correctly, or whether you're ready for the upcoming move to payrolling?
Get in touch with RK Accounting – we'll review your current reporting or help you get your car/van tax arrangements right from the start, and get you ready for the 2027 changes.
📩 RK Accounting Ltd
