Employees with company cars may be paying unnecessary tax on private fuel, when reimbursing the cost of private fuel in full can often remove the car fuel benefit charge altogether.

Where an employee is provided with a company car and fuel for private use, the default position is that the employee must pay the car fuel benefit charge. The amount of the charge is calculated based on the car’s CO2 emissions and applied to the car fuel benefit multiplier, which is currently £28,200 and is set to increase to £29,200 for the 2026–27 tax year.

Avoiding the car fuel benefit charge is possible if the employee reimburses their employer for all fuel used for private journeys, a process known as ‘making good’. Private fuel includes all fuel used for commuting to and from work. To do this, employees should keep a record of private mileage and repay their employer using the published advisory fuel rates. These rates are designed to reflect average fuel costs and are updated quarterly.

If properly documented, HMRC will accept that no car fuel benefit charge is due, meaning the employee avoids the income tax liability on the private fuel. In most cases, reimbursing the employer is far cheaper than paying the tax, especially for employees with relatively low private mileage.

The car fuel benefit charge will still apply if it cannot be demonstrated to HMRC that the employee has reimbursed the full cost of fuel used for private journeys, including commuting. To prevent this, employees must maintain a detailed log of private mileage and ensure they make good the cost of all fuel provided for private use.

With the 31 January deadline approaching, thousands of taxpayers are using HMRC’s Time to Pay service to spread the cost of their self-assessment tax bill rather than facing immediate payment pressure.

HMRC has reported that thousands of people have set up payment plans to help spread the cost of their self-assessment tax bill. Taxpayers with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s ‘Time to Pay’ service. Almost 18,000 self-assessment payment plans were set up between 06 April 2025 and 30 November 2025. The deadline to file and pay any tax owed for the 2024-25 tax year is 31 January 2026.

If you owe tax to HMRC, you may be able to set up an online ‘Time to Pay’ payment plan depending on the type of tax debt and your circumstances. For self-assessment, you can create a payment plan online if you’ve filed your latest tax return, owe £30,000 or less, are within 60 days of the deadline and have no other debts or payment plans with HMRC.

A Time to Pay arrangement cannot be set up until a self-assessment return has been filed. If the tax owed is more than £30,000, or a longer repayment period is needed, people can still apply but will need to contact HMRC directly. HMRC will typically ask for details about your income, expenses, other tax liabilities, and any savings or assets, which they may expect you to use toward your debt.

HMRC will usually only offer taxpayers the option of extra time to pay if they think they genuinely cannot pay in full now but will be able to pay in the future. If HMRC do not think that more time will help, then they can require immediate payment of a tax bill and start enforcement action if payment is not forthcoming.

As an employee, you pay tax on certain company benefits, such as cars, accommodation, and loans. Your employer calculates the tax you owe and deducts it through Pay As You Earn (PAYE). The amount of tax depends on the type and value of the benefit.

Some company benefits are tax-free, including childcare support and meals provided in canteens. Cash payments, however, are treated as earnings and are always subject to tax and National Insurance contributions.

Other taxable benefits you will pay tax on include the following:

Medical Insurance

You usually pay tax on the cost of the insurance premiums if your employer pays for your medical insurance. However, some health benefits are tax-free, including medical insurance while you are working abroad and annual check-ups.

Loans

You may have to pay tax on low-interest or interest-free loans from your employer if the loan is more than £10,000. The tax is calculated on the difference between the interest rate you pay and the official rate of interest set by the Bank of England. You could also be liable for tax if your employer lends money to one of your relatives.

Living Accommodation

If you (or one of your relatives) lives in accommodation provided by your employer, you may need to pay tax. The calculation depends on whether the accommodation costs are more than £75,000. You might not have to pay tax if the accommodation is provided so you can perform your job or do it more effectively, for example, agricultural workers living on farms.

As part of the Budget measures, the government confirmed plans to make some changes to the Construction Industry Scheme (CIS).

From 6 April 2026, HMRC will be able to take immediate action where a business makes or receives a payment that it knew, or should have known, was connected to fraud. In these circumstances, HMRC will have the power to remove Gross Payment Status (GPS) with immediate effect, assess the business for the associated tax loss, and impose a penalty of up to 30%. This penalty may be applied to the business itself or to its officers. Where GPS is withdrawn due to fraud or serious non-compliance, the business will also be barred from reapplying for GPS for a period of five years (an increase from the current one-year limit).

Alongside these measures, the government also plans to simplify the CIS by exempting payments to local authorities and certain public bodies. As part of this change the requirement for construction contractors to submit nil returns will be required. These changes are due to take effect from 6 April 2026 and will first be subject to technical consultation.

The CIS is a set of special tax and National Insurance rules for businesses operating in the construction industry. Under the scheme, businesses are classed as either contractors or subcontractors, and both must understand their tax obligations.

Qualifying contractors are required to deduct tax from payments made to subcontractors and pass these deductions to HMRC. The amounts deducted count as advance payments towards the subcontractor’s tax and National Insurance liabilities.

Subcontractors are not required to register for the CIS, but where they are not registered, contractors must deduct tax at a higher rate of 30%. Registered subcontractors are subject to a 20% deduction unless they qualify for GPS. Where GPS applies, no deductions are made by the contractor, and the subcontractor is responsible for paying all tax and National Insurance at the end of the tax year.

To qualify for GPS, a subcontractor must meet specific criteria, including a strong compliance history of paying tax and National Insurance on time, and carrying on a business that undertakes construction work or supplies construction labour in the UK.

An extension of First-Year Allowances (FYA) for zero-emission cars and charge points was announced as part of the recent Budget measures.

This means that the 100% FYA for qualifying expenditure on zero-emission cars, and electric vehicle (EV) charge points will now be available until 31 March 2027 for Corporation Tax purposes, and until 5 April 2027 for Income Tax purposes. This one-year extension to the current reliefs means that eligible businesses can continue to deduct 100% of the cost of these assets from their taxable profits in the year the expenditure is incurred until the relief expires.

The FYA for cars was introduced from 17 April 2002 for low CO₂-emission vehicles, including electric cars, and was then restricted to zero-emission cars from April 2021. The FYA for electric vehicle charge points was introduced in November 2016. Both of these allowances are intended to support the UK’s move towards cleaner vehicles.

According to HMRC’s figures, this measure is expected to benefit around 13,000 incorporated businesses and 6,000 unincorporated businesses by continuing to offer 100% tax relief in the year the expenditure is incurred for qualifying expenditure on zero-emission cars and EV charge points.