MilometryChoosing a company car: the numbers that actually decide it
List price, CO2 and the benefit-in-kind percentage do more to your take-home than the car does to your commute.
Information générale, pas un conseil. Rédigé à titre d’information générale et exact à notre connaissance au 27 septembre 2026. Les règles fiscales changent et leur application dépend de votre situation. Ceci n’est pas un conseil fiscal, juridique ou financier : vérifiez auprès d’un expert-comptable, d’un conseiller fiscal ou de l’administration fiscale avant de vous y fier.
A company car is not a perk with a tax side-effect. It is a taxable benefit whose size you choose when you pick the car, and the difference between two similar cars can be hundreds of pounds a year of take-home.
How the charge is built
Three numbers multiply together:
- List price (P11D value): the manufacturer's price including VAT and delivery, plus options. Note that it is the list price, not what your employer negotiated.
- The appropriate percentage, driven mainly by CO2 emissions, with electric and low-emission cars at the bottom of the scale and high emitters at the top.
- Your marginal rate of tax.
The taxable benefit is list price × percentage. You then pay income tax on that at your rate, and the employer pays Class 1A NICs on it.
The practical consequence: a cheaper car with high emissions can cost more in tax than a pricier car with very low ones.
How the benefit is built
| Step | Example |
|---|---|
| List price (P11D value), including options | £35,000 |
| Appropriate percentage, driven by CO2 | 25% |
| Taxable benefit | £8,750 |
| Your marginal tax rate | 40% |
| Income tax you pay per year | £3,500 |
Change only the CO2 figure and the answer moves enormously:
| Appropriate percentage | Taxable benefit on £35,000 | Tax at 40% |
|---|---|---|
| 4% (electric, 2026-27) | £1,400 | £560 |
| 12% | £4,200 | £1,680 |
| 25% | £8,750 | £3,500 |
| 37% (high emitter) | £12,950 | £5,180 |
A cheaper car with high emissions can easily cost more tax than a pricier low-emission one.
Fuel is a separate decision
If the employer also pays for private fuel, there is a car fuel benefit on top, and it is calculated from a fixed multiplier and the same CO2 percentage, not from how much fuel you actually used.
That tends to make it poor value for anyone with modest private mileage. Repaying the employer the full cost of private fuel (Advisory Fuel Rates are the usual yardstick) removes the charge, and for low private mileage that can cost less than the tax.
You cannot work out which applies without knowing your private mileage. Which means you need the log before you can make the decision.
Company car or your own car?
The alternative is running your own car, with your employer paying approved mileage rates: 55p a mile for the first 10,000 business miles in the tax year, then 25p, tax free (for journeys from 6 April 2026). If the employer pays less, you can claim tax relief on the shortfall.
Very roughly:
- High business mileage, modest car: your own car often comes out ahead, because 55p a mile can exceed a cheap vehicle's real running costs (though above 10,000 business miles the rate drops to 25p).
- Low business mileage, expensive or low-emission car: the company car often comes out ahead, because there is little mileage to claim and the benefit charge on an EV is small.
- Anything in between: do the arithmetic, and do it with real mileage figures rather than an estimate.
The thing to do first
Before comparing anything, get an accurate picture of how many business and private miles you actually drive. Estimates are easy to get wrong, in either direction.
Milometry keeps each vehicle separate and splits the miles as you go, so when the company car conversation comes round you are choosing on your own numbers.
Sources
- Tax on company cars (HMRC)
- Income Tax (Earnings and Pensions) Act 2003, section 139: the appropriate percentage (legislation.gov.uk)
- Advisory fuel rates (HMRC)
- Increasing mileage rates (HMRC policy paper)
- Business travel mileage for employees' own vehicles (HMRC)
- Travel, mileage and fuel rates and allowances (HMRC)
- Vehicle tax rate tables (DVLA)
General information, not tax advice. Benefit-in-kind percentages are set years ahead and change: check the current tables for the tax year you are choosing in.
