Use this UK-focused calculator to compare your annual net position with a company car versus a cash car allowance. Enter your own numbers for a realistic result.
Result
How this company car vs car allowance calculator works
At a high level, the calculator compares money in versus money out for each option. For a car allowance, your gross allowance is reduced by tax, National Insurance, and any pension deduction. Then business mileage reimbursement is added, and your annual car costs are subtracted.
For a company car, the calculator estimates your Benefit-in-Kind (BIK) tax bill based on list price and BIK percentage. It then adds any fuel benefit tax and out-of-pocket costs like private fuel or parking. Business mileage reimbursement is added back in.
The core comparison formula
- Allowance net position = net allowance + mileage reimbursement (own car) - own car annual costs
- Company car net position = mileage reimbursement (company car) - BIK tax - fuel benefit tax - personal out-of-pocket costs
- The higher net position is generally the better financial outcome.
Company car vs cash allowance: key differences
When a company car can be attractive
- You want predictable costs and less admin.
- Your employer includes servicing, insurance, or maintenance.
- You can access a low-emission or electric vehicle with a favorable BIK rate.
- You do high business mileage and prefer not to carry repair risk.
When a car allowance can be attractive
- You can run a reliable car for less than your net allowance.
- You want freedom to choose, keep, or sell your own vehicle.
- You can optimize ownership costs (insurance shopping, efficient car, low depreciation).
- You may already own a suitable car outright.
Important tax concepts to know
1) BIK tax (Benefit-in-Kind)
Company cars are taxed as a benefit. In simplified form, taxable value is often based on list price multiplied by a BIK percentage linked to emissions and policy year. Your personal tax rate then determines the final tax paid.
2) Car allowance is usually treated as salary
A cash allowance is normally taxed like ordinary pay, so your take-home amount is materially lower than the headline allowance figure. This is why a “£6,000 allowance” does not feel like £6,000 in your bank account.
3) Mileage reimbursement matters more than people think
If you drive significant business mileage, reimbursement rates can meaningfully change the comparison. Always include realistic mileage and rates in your estimate.
Costs people often forget to include
- Tyres and unexpected maintenance
- Insurance premium differences
- Depreciation (or lease penalties at end of term)
- Home charging installation and electricity tariffs for EVs
- Parking, tolls, and clean air zone charges
- Opportunity cost of deposit or tied-up cash
Quick example mindset
If your own annual car costs are modest and your net allowance remains substantial after tax, a car allowance may leave more disposable income. But if your employer offers a high-value company car package with low BIK and bundled running costs, the company car can win, especially for drivers who value convenience and certainty.
FAQ
Is this calculator accurate for every employer scheme?
No. It is a planning estimate. Employer policy, payroll setup, fuel rules, and tax details can vary.
Should I include private fuel in company car costs?
Yes. If private fuel is not fully covered by your employer, include what you expect to pay personally in the company car out-of-pocket field.
Can an EV change the result significantly?
Absolutely. Electric vehicles can have much lower BIK rates, which can make company car taxation much lighter than many petrol or diesel alternatives.
Final takeaway
The best choice is rarely just about headline allowance or list price. The winning option is the one with the better net annual position after tax, mileage, and true running costs. Use the calculator with your real numbers, then verify the result with payroll or an accountant before making a final decision.