Company car vs cash allowance 2026/27
Offered a company car or a cash allowance instead? The car is taxed as a benefit in kind based on its list price and CO₂ emissions; the allowance is taxed like salary. Enter the figures to see which option leaves you better off.
Compare car vs cash →How each option is taxed
A company car creates a benefit-in-kind (BIK) charge: the car's list price multiplied by a percentage based on CO₂ emissions, taxed at your marginal rate. Electric cars have very low BIK percentages, which can make an EV company car exceptionally tax-efficient.
A cash allowance is simply added to your salary and taxed at your marginal rate plus National Insurance — but you then bear the cost of buying, insuring and maintaining your own car.
Frequently asked questions
Is a company car or car allowance better?
It depends on the car's BIK rate and your marginal tax rate. Low-emission and electric cars usually favour the company car; for petrol/diesel cars with high BIK percentages, taking the cash allowance often wins.
How is company car tax calculated?
List price × BIK percentage (set by CO₂ emissions) × your marginal Income Tax rate. An electric car with a low BIK percentage can cost only a few hundred pounds a year in tax.
Is a car allowance taxed like salary?
Yes. A cash allowance is added to your gross pay and attracts Income Tax and National Insurance at your normal rates, so a £5,000 allowance is worth roughly £2,900–£3,600 after deductions.