Is it more tax-efficient to use my own car for work or take a company car?

Full answer

The comparison between using your own car for work versus taking an employer-provided company car depends heavily on the specific car's emissions, list price, your business mileage, and your personal tax rate, so there is no single universally correct answer. **How company car tax works** A company car provided for private use as well as business use is taxed as a Benefit in Kind, calculated as a percentage (based on the car's CO2 emissions, and for electric or low-emission cars, also its electric range) of the car's list price (P11D value), with that resulting figure added to your taxable income and taxed at your marginal Income Tax rate -- fully electric cars currently attract a very low Benefit in Kind percentage compared with a typical petrol or diesel car, making them particularly tax-efficient as a company car choice. **How using your own car works instead** If you use your own car for business journeys, your employer can pay you tax-free mileage allowance up to the HMRC approved rates (45p per mile for the first 10,000 business miles, 25p after that), and if they pay less than this, you can claim Mileage Allowance Relief on the shortfall -- there is no Benefit in Kind charge at all in this scenario, since you are simply being reimbursed (up to approved limits) for using an asset you already own and pay for privately. **Worked example -- high business mileage favouring own car** Someone drives 15,000 business miles a year in their own car and is paid the full 45p/25p approved rates by their employer (45p on the first 10,000 miles = £4,500, plus 25p on the remaining 5,000 miles = £1,250, totalling £5,750, all tax-free). No Benefit in Kind arises at all. This can compare very favourably against taking an equivalent company car, where a meaningful annual Benefit in Kind tax charge would apply regardless of business mileage. **Worked example -- low mileage, low-emission car favouring company car** Someone who does relatively little business driving, but wants a brand new electric car anyway for personal use, may find that taking it as a company car (given the low Benefit in Kind percentage for electric vehicles) results in a smaller annual tax charge than the cost of buying, insuring, and maintaining the same car privately -- in this scenario, the low emissions-based tax rate combined with low personal mileage-based benefit can make the company car route more tax-efficient overall, especially once salary sacrifice arrangements (where offered) are factored in. **Salary sacrifice electric car schemes** Many employers now offer salary sacrifice schemes specifically for electric or ultra-low emission cars, where the employee gives up some salary in exchange for the car, combining the low company car Benefit in Kind rate with an effective saving on Income Tax and National Insurance on the sacrificed salary -- this can make an electric company car considerably cheaper overall than financing the same car privately, even for drivers with relatively low business mileage. **Wear, insurance, and depreciation risk** Using your own car for business exposes you to the ongoing costs and risks of vehicle depreciation, business-use insurance premiums (which are often higher than purely personal-use cover), and maintenance, which the approved mileage rate is meant to broadly cover but may not fully compensate for high-mileage or unusually expensive-to-run vehicles -- a company car shifts these costs and risks to the employer instead. **Practical tip** Compare your actual or expected annual business mileage and personal car preferences against both the tax-free mileage allowance route and the Benefit in Kind cost of a specific company car (factoring in any salary sacrifice scheme available), since the more tax-efficient option depends heavily on your specific mileage pattern and the emissions of the car being considered, not a one-size-fits-all rule.

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