Company cars vs personal cars: mileage, benefit in kind and electric vehicles

The company reimburses business mileage at the approved rates: 45p per mile for the first 10,000 business miles in the tax year and 25p thereafter, with 24p a mile for motorcycles and 20p for bicycles. The payment is tax free for you and deductible for the company.

Keep a mileage log with date, journey, purpose and miles. Commuting to a permanent workplace is not business mileage.

The benefit in kind is the list price multiplied by an appropriate percentage driven by CO2 emissions, which for conventional cars is high. You pay income tax on that amount and the company pays Class 1A National Insurance at 15%.

The company deducts running costs and capital allowances, but for a typical higher-rate director the benefit charge usually outweighs the relief across the period of ownership.

Fully electric cars carry a very low appropriate percentage, so the benefit in kind on an expensive car can be a fraction of the equivalent petrol charge. New, unused zero-emission cars can also attract a 100% first-year allowance, and there is no fuel benefit charge for electricity.

Charging at the workplace is not a taxable benefit. Reimbursing home charging for business mileage uses HMRC's advisory electric rate.

The percentages rise over the next few years, so model the whole period of ownership rather than the first year alone.

Vans have a flat benefit charge, which is nil where private use is only ordinary commuting and insignificant other use. That makes a genuine work van far cheaper than a car.

A pool car must be available to more than one employee, not normally kept overnight at a home, and used only for business. Sole director companies almost never meet the test in practice.

Rates, thresholds and deadlines quoted here reflect the 2026/27 UK tax year. Check current GOV.UK guidance, or ask us, before relying on them for your own company.