A company car is taxed as a benefit in kind, and the cost varies hugely with the car. We work out your charge, compare it with a car allowance or using your own car, and show how an electric car can cut the tax dramatically.
Company Car Tax
A company car available for private use is taxed as a benefit in kind, based on the car's list price and its CO2 emissions, which set a percentage of the value that is added to your taxable income each year. Petrol and diesel cars can carry a heavy charge, while fully electric cars have a very low benefit-in-kind percentage, making them strikingly tax-efficient, especially through salary sacrifice.
Your Tax Help Accountants calculates your company car benefit precisely, including fuel benefit if provided, and compares it against taking a car allowance or using your own car and claiming mileage. For directors and employers, we advise on the most tax-efficient choice and handle the P11D reporting. Increasingly, the answer is an electric car, and we show you the numbers.
The benefit-in-kind charge on a fully electric company car is a fraction of that on an equivalent petrol or diesel model, so for many directors and employees an EV, particularly via salary sacrifice, is now one of the most tax-efficient perks available.
The Detail That Matters
A company car is taxed as a benefit in kind based on its list price and CO2 emissions, which means a petrol or diesel car can be expensive to run through a company, while an electric car is taxed at a strikingly low rate, making the choice of vehicle the key decision.
The taxable benefit is the car's list price multiplied by a percentage set by its CO2 emissions, then taxed at your marginal rate. A high-emission car can have a benefit percentage above 30%, so a £40,000 car could add £12,000+ to your taxable income each year.
Fully electric cars carry a benefit-in-kind rate of just 3% for 2025/26 (rising slowly by 1% a year), so the same £40,000 electric car creates a taxable benefit of only £1,200. For a director, this is one of the most tax-efficient benefits available.
The company gets full capital allowances on a new electric car (100% first-year allowance) and can reclaim VAT on charging in some cases, and the running costs are deductible. Combined with the low personal benefit, an electric company car often beats taking salary or dividends to buy one personally.
A separate, and expensive, fuel benefit applies if the company pays for private fuel in a petrol or diesel car, and it is rarely worth it. Electric charging provided at the workplace is treated far more favourably. We model the total cost, car plus fuel, before you decide.
The classic mistake is running a petrol or diesel car through the company for convenience, where the benefit-in-kind charge costs far more in personal tax than simply owning it privately, when an electric car would have flipped the maths entirely.
Key Figures
How We Help
We calculate the exact company car tax based on list price and emissions, including fuel benefit if provided, so you know what it really costs you.
Fully electric cars carry a very low benefit-in-kind percentage. We show how an EV, especially through salary sacrifice, can slash the tax versus a petrol or diesel car.
We compare a company car against a cash allowance or using your own car and claiming mileage, and recommend the most tax-efficient option for you.
All the forms, calculations and correspondence handled on your behalf, so you never have to decode HMRC's rules or sit on hold.
A clear fixed fee quoted after a free call, your position explained in plain English, and never a surprise bill.
We act quickly, and where earlier years are involved we put those right too, reclaiming refunds or minimising penalties.
Company car tax catches people out because the charge depends heavily on the car's emissions and list price, and fuel benefit can make a modest perk expensive. Meanwhile many miss the huge savings available from electric cars. We run the numbers so you make the efficient choice.
Recent Client Outcome
A director was about to put a £45,000 diesel SUV through their company, which would have created a benefit in kind of over £15,000 a year.
What we did. We modelled the diesel against a comparable £45,000 electric car, factoring in the 3% benefit rate, the 100% first-year allowance for the company, and the low charging costs.
The outcome. The electric car produced a taxable benefit of about £1,350 instead of £15,000, saving the director around £5,500 a year in personal tax, while the company claimed the full purchase cost against Corporation Tax in year one.
Choosing the vehicle with the tax rules in mind, rather than after the fact, transformed the cost of running a car through the business.
Why People Come to Us
Questions Answered
Free fifteen-minute call. Fixed quote within twenty-four hours. Your return filed, every expense claimed, your bill explained, and salon VAT, payroll and accounts handled if you own a salon. Same accountant, start to finish.
Or email info@yourtaxhelp.co.uk, we typically respond within two business hours.
📅 Free consultation calls available weekdays 1pm to 3pm and 7pm to 8pm. Pick a slot that suits you.