Company Cars
Weighing up the options
Company cars can be a great perk, but if you don't choose carefully you could end up paying more tax than you bargained for. We'll help you decide whether to take cash or a car and if you opt for a car, we'll show you how to keep costs down.
Take the money
A cheque for £5,000 sounds like a lot of money. But if you're a higher-rate taxpayer, it's only £250 a month net for you to buy and run a car.
Hidden extras You may want to use the £250 a month to pay off a loan for a car. Then you could find you have to dip in your pocket for the deposit and any repairs that need doing.
On top of that, you've got to tax the car and insure it for business use. And remember, the car goes down in value each year, so you need to take this into account, too.
Cash or car? Our Cash or Car Calculator makes the sums easy. Don't use an expensive car in the car tax calculation and then buy a cheaper model though – you'll only kid yourself you're saving more than you really are.
Trimming the Costs
To cut down the amount of tax you pay on a company car, choose a smaller, cheaper or greener model. Put simply: the more you pollute and the more expensive the car, the more tax you'll pay.
CO2 and tax Since 2002 Company car tax has been based on official CO2 emissions – the higher the figure the higher your tax bill.
The new law is working. Since 2002 we've been buying more diesel cars and more small cars.
Be aware that you pay more tax on a diesel car than on a petrol car giving out the same amount of CO2. Diesel cars give out more toxic emissions than petrol cars.
How much tax?
Our Company Car Tax Calculators can help you do the sums.
Emissions table The Inland Revenue publishes a table showing CO2 emission values and the percentage of the price of the car you pay in tax. The percentages may change after each budget.
See the Emissions table and get more details about company car taxation.
'Free Fuel'
Your employer offers you a brand new company car and offers to pay for all the petrol or diesel you use for your private mileage too. Sounds great, but remember you will pay tax on it.
You pay a flat amount based on how much CO2 the car emits. The mileage you cover doesn't affect the tax calculation but it does clearly affect the comparable 'cost of fuel' calculation – the lower your private mileage the less you'd have to spend at the pumps.
Many company car drivers have handed back their fuel cards when they realise that they could have bought the fuel for less than the cost of the tax.
Calculator Use our Private Fuel Benefit Calculator to see if you'll be better off with 'free' fuel for your own use.