Question 1

Is a car allowance better than a company car?

Accepted Answer

It depends on the allowance after tax and NI, your own car costs, business mileage payments and the company car’s BIK tax. Compare the employer’s full package too, including maintenance, insurance and fuel support.

Question 2

How is a cash car allowance taxed?

Accepted Answer

A cash allowance is normally paid with your salary and subject to income tax and employee National Insurance. This calculator applies one selected tax rate and the simplified salary-based NI rate; your payroll deductions may differ.

Question 3

Can I claim mileage relief with a car allowance?

Accepted Answer

For eligible business journeys in your own car, compare your employer’s mileage payments with HMRC’s approved amount. A shortfall may qualify for Mileage Allowance Relief. It is tax relief on the shortfall, rather than a refund of all unreimbursed costs. Ordinary commuting does not qualify.

Question 4

Why can an electric company car be cheaper?

Accepted Answer

The published zero-emission BIK percentage is 4% in 2026/27 and 5% in 2027/28. That can reduce company car tax compared with a higher-emission car at the same P11D price. Electricity does not attract the private fuel benefit charge.

Question 5

What costs should I include for my own car?

Accepted Answer

Use your own annual finance or lease, insurance, servicing and tyre, VED and relevant depreciation figures. Avoid counting purchase or finance principal and depreciation twice. This tool does not estimate insurance or include fuel and charging costs; compare any difference in those costs separately.

Taking the allowance instead?

Taking the allowance instead?

Car allowance vs company car which is better for you?

Taking the allowance instead?

Taking the allowance instead?