Answers · UK 2025/26

Is it better to claim mileage allowance or have a company car?

Mileage allowance (Approved Mileage Allowance Payments, currently 45p per mile for the first 10,000 business miles and 25p thereafter for cars) suits employees who use their own car occasionally for business trips, with no separate benefit-in-kind tax charge. A company car makes more sense for high-mileage roles or where you want a newer, employer-maintained vehicle, but it creates an annual benefit-in-kind tax charge based on the car's list price and CO2 emissions, which is often more expensive for higher-emission cars.

Last updated: 2 July 2026Last reviewed: 2 July 2026How we verify

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Whether mileage allowance or a company car works out better financially depends heavily on your annual mileage, the type of car involved, and your personal tax position. **How mileage allowance works** If you use your own car for business journeys, your employer can pay you Approved Mileage Allowance Payments (AMAP) tax-free, currently 45p per mile for the first 10,000 business miles in a tax year and 25p per mile after that (for cars and vans; rates differ for motorcycles and bicycles). If your employer pays less than the approved rate, you can claim Mileage Allowance Relief on the shortfall from HMRC; if they pay more, the excess is taxable. Crucially, using your own car and claiming mileage does not create any benefit-in-kind tax charge, since you already own the asset. **How company car tax works** A company car is a benefit-in-kind, taxed based on the car's official list price (P11D value) multiplied by an appropriate percentage determined by its CO2 emissions (and, for hybrids, electric-only range) -- this percentage can range from as low as 2% for pure electric vehicles up to 37% for the highest-emission petrol and diesel cars. You pay Income Tax on this notional benefit value at your marginal rate, and your employer pays Class 1A National Insurance on it too. **Electric company cars are especially favourable** Because fully electric company cars currently attract a very low benefit-in-kind percentage, many employees find an electric company car scheme (often via salary sacrifice) considerably cheaper in tax terms than either mileage allowance in their own petrol car or a traditional company car -- this has become one of the most tax-efficient employee benefits currently available. **Break-even considerations** High-mileage drivers (for example, sales reps covering 20,000+ business miles a year) often find a company car, especially a low-emission or electric one, works out cheaper overall once fuel, maintenance, insurance, and depreciation on a personal car are all factored in. Lower-mileage employees, or those who value flexibility and choice of car, often prefer keeping their own car and claiming AMAP mileage instead. **Don't forget fuel benefit** If your employer also pays for private fuel in a company car (not just business fuel), a separate car fuel benefit charge applies, which is often poor value unless your private mileage is very high -- many employees decline free private fuel and instead reimburse their employer for private fuel used. **Practical tip** Model both options using your actual annual mileage, car choice, and marginal tax rate -- an electric company car via salary sacrifice is worth serious consideration given current low benefit-in-kind rates, especially for higher rate taxpayers.