Car Allowance vs Company Car Calculator 2026/27

Compare taking a car allowance versus a company car after tax. Includes Benefit in Kind (BIK) tax, running costs and true net advantage for 2026/27.

Best Option
Car Allowance
Net annual advantage: £0.00
Option A · Car Allowance
£0.00
Net annual position
Option B · Company Car
£0.00
Net annual position
Allowance Received (Gross)
£0.00
£0/mo
Allowance After Tax
£0.00
£0/mo
BIK %
0%
of P11D value
BIK Taxable Value
£0.00
annual taxable benefit
BIK Tax Cost
£0.00
£0/mo
Net Advantage
£0.00
Car Allowance ahead
Enter your details to compare car allowance vs company car.
Net Annual Position Comparison
Positive = money in your pocket. Negative = net cost to you.
Benefit in Kind Rates 2026/27
Fuel Type / CO2 (g/km) BIK %
Electric (0 g/km)3%
1–50 g/km (plug-in hybrid)5%
51–75 g/km8%
76–94 g/km17%
95–99 g/km20%
100–104 g/km21%
105–109 g/km22%
110–114 g/km23%
115–119 g/km24%
120–124 g/km25%
125–129 g/km26%
130–134 g/km27%
150–154 g/km31%
170+ g/km37% (max)
Diesel (non-RDE2 surcharge)+4%
Fuel benefit base (2026/27 est.)£27,800 × BIK%

Car Allowance vs Company Car · Take-Home Comparison 2026/27

Car allowance is added to salary and taxed as income. HMRC approved mileage rate: 45p/mile (first 10,000 miles), 25p above.

Car Allowance Tax Rate After-Tax Value If Driving 10,000 miles (AMAP claim) Net Value
£3,000/yr20%£2,400£4,500 AMAP£6,900 total
£3,000/yr40%£1,800£4,500 AMAP£6,300 total
£4,000/yr20%£3,200£4,500 AMAP£7,700 total
£4,000/yr40%£2,400£4,500 AMAP£6,900 total
£5,000/yr20%£4,000£4,500 AMAP£8,500 total
£5,000/yr40%£3,000£4,500 AMAP£7,500 total
£6,000/yr20%£4,800£4,500 AMAP£9,300 total
£6,000/yr40%£3,600£4,500 AMAP£8,100 total

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Car Allowance vs Company Car FAQs

Is car allowance taxable in the UK in 2026?
Yes. A car allowance is treated as part of your salary and subject to income tax and National Insurance at your marginal rate. A £5,000/year allowance costs a basic rate taxpayer around £1,000 in tax and NI, leaving £4,000 net. Higher rate taxpayers keep only £3,000. You can additionally claim HMRC approved mileage rates (45p/mile for the first 10,000 business miles) on top of your allowance.
Car allowance vs company car · which is better UK?
It depends on the car type and your driving habits. For electric vehicles, a company car is usually better · the 3% BIK rate means very low tax cost and the employer covers all running costs. For high-emission petrol or diesel cars with BIK rates of 25–37%, a car allowance is often better value. High-mileage drivers who can claim HMRC mileage rates benefit most from the allowance route.
What is the HMRC mileage rate for 2026?
The HMRC Approved Mileage Allowance Payment (AMAP) rate is 45p per mile for the first 10,000 business miles per tax year, and 25p per mile above that. These apply to cars and vans, including electric vehicles. If your employer pays below these rates, you can claim the difference as tax relief through Self Assessment. Driving 10,000 business miles generates a £4,500 tax-free AMAP claim.
How does car allowance work for UK tax?
A car allowance is added to your gross salary before tax is calculated. It appears on your payslip and is taxed via PAYE alongside your normal pay · no separate declaration is needed unless you also claim mileage relief. Unlike a company car, there is no BIK tax. You are responsible for all running costs including insurance, servicing, fuel and finance. The car belongs to you, not your employer.

For informational purposes only · Not financial advice · BIK rates and thresholds shown are estimates for 2026/27 · Always verify with HMRC or a qualified tax adviser