Using a company car vs a personal car: the key considerations

Deciding whether to provide a car through the company or continue using your personal vehicle involves weighing Corporation Tax savings against personal Benefit in Kind tax.

Company car: the tax cost

A company car is what is termed a Benefit in Kind (BIK). You pay personal Income Tax on the BIK value, which is the car's P11D value (its list price including VAT and delivery, not the discounted price you paid) multiplied by a CO2 percentage. For a high-emission car, this can be significant. A fully electric car has a BIK rate of 4% in 2026/27, rising to 5% in 2027/28, making it far more tax-efficient. The company claims capital allowances and deducts all running costs.

Fuel and charging

If the company also pays for fuel used on private journeys in a petrol or diesel company car, that creates a separate Car Fuel Benefit, which is a further P11D charge calculated by applying the same CO2 percentage to a fixed HMRC figure (£28,200 for 2026/27). This is often expensive, so directors usually repay the private fuel cost to the company instead, which removes the charge. Electricity is treated differently: HMRC does not regard it as a fuel, so charging a fully electric company car, whether at the workplace, or paid for or reimbursed by the company for home charging, creates no fuel benefit and no P11D entry, even where there is private use.

Personal car with mileage claims

Using your personal car and claiming the approved mileage rate is simpler. No BIK arises, no Capital Gains Tax issue when the car is sold, and no complex calculations needed. For low-mileage usage, this is usually more tax-efficient than a company car unless the car is electric.

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