MilesheetChoosing 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.
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% |
|---|---|---|
| 2% (typical electric) | £700 | £280 |
| 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 makes it a bad deal for anyone with modest private mileage. Many drivers are better off repaying the cost of private fuel, using Advisory Fuel Rates as the yardstick, and avoiding the charge entirely.
You cannot work out which side you are on 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 and claiming approved mileage rates — 45p a mile for the first 10,000 business miles, then 25p, tax-free.
Very roughly:
- High business mileage, modest car — your own car often wins, because 45p a mile is generous against a cheap vehicle's real costs.
- Low business mileage, expensive or low-emission car — the company car often wins, 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. Almost everyone guesses this badly, usually overestimating business use.
Milesheet 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
- HMRC — Advisory fuel rates
- HMRC — Business travel mileage for employees' own vehicles
- HMRC — Travel, mileage and fuel rates and allowances
- DVLA — Vehicle tax rate tables
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.