Company Car vs Cash Allowance Calculator (UK, 2025/26)

Compare company car BiK tax (P11D × CO2-linked % × your marginal rate) against a cash allowance net of income tax, 8% NI, lease, fuel, insurance and maintenance. Full 2025/26 HMRC BiK CO2 ladder (2–37%), EV/PHEV bands (3% EV, 2–14% PHEV by range), +4% non-RDE2 diesel supplement, Scottish tax bands, 3-year projection and mileage crossover.

⏱️ 5-7 minutes • 💪 Standard

Updated April 2026

How This Tool Works

📋 Purpose

UK company cars are taxed on P11D list price × CO2-linked BiK % × marginal tax rate. Cash allowances are just salary — income tax plus 8% NI. Whether car or cash wins depends heavily on fuel type (EVs are 3% BiK in 2025/26), CO2, your tax band, private mileage, and whether your employer provides fuel. This tool runs the full 2025/26 HMRC BiK ladder and shows you the true annual net cost of each option.

⚙️ How It Works

  1. 1
    Enter gross salary, tax band and private mileage.
  2. 2
    Enter the vehicle's P11D list price, CO2 g/km and fuel type.
  3. 3
    For PHEV, enter WLTP electric-only range (drives the band).
  4. 4
    Enter the gross cash allowance offered and any private lease cost.
  5. 5
    We compute BiK taxable amount × your marginal tax rate.
  6. 6
    We compute cash allowance net of income tax + 8% NI, less lease + fuel + insurance + maintenance.
  7. 7
    We project 3 years of BiK bands (rising) for both options.
  8. 8
    We find the private mileage crossover point.

Company Car vs Cash Allowance — 2025/26 HMRC

Company car or cash allowance — which actually leaves you better off?

BiK tax is based on the P11D list price × a CO2-linked percentage × your marginal tax rate. Cash allowance is added to gross salary and subject to income tax + 8% NI. The winner depends on fuel type, emissions, your tax band, mileage and private lease costs. EV BiK rates (3% in 2025/26, rising to 5% in 2027/28) often make company EVs the cheapest option for higher-rate taxpayers.

You & your tax band

The vehicle on offer

Set to 0 for EV. Drives the BiK % ladder.

The cash alternative

The gross amount added to your salary in lieu of a car.

Leave 0 to use an estimate based on list price.

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Complete Guide: Company Car vs Cash Allowance in 2025/26

Why EVs dominate, how the BiK ladder works, and when cash allowance still wins.

📅 Last updated: April 2026

Quick Tips

Jump-start your understanding with these essential tips

On a £40k EV with a £6k cash alternative, a higher-rate taxpayer typically saves £2,000–£3,500/year with the company car. The 3% BiK makes it almost tax-free.

If you own a paid-off car, cash allowance = extra net income you can spend on anything. You avoid the "new lease every 3 years" cycle.

Free private fuel sounds great but the BiK on it is fixed at £27,800 × your BiK rate. For low-mileage drivers it rarely pays back.

A PHEV with 70+ miles electric range has a 5% BiK, versus 14% for one with under 30 miles. Always ask for the WLTP electric-only range figure.

EV BiK rises steeply after 2027/28. Plan 3-year leases to end before rates reset — HMRC reviews every 3 years.

Step-by-Step Guide

Follow these steps to get the most from this tool

Your marginal tax rate is the single biggest driver of BiK cost. Scottish taxpayers: pick the correct Scottish band.

P11D = manufacturer list price including VAT, delivery and options. CO2 g/km drives the BiK % — ask for the WLTP combined CO2 figure.

EV = 3%. PHEV requires the electric-only range. Diesel = check if RDE2 compliant (4% supplement if not).

This is the GROSS annual amount. We compute the net after income tax and NI automatically.

The mileage sensitivity chart shows which option wins at your mileage plus the crossover point. The 3-year projection shows BiK bands rising.

If the two options are within £500/year, ask HR for a higher cash allowance or a better vehicle spec — employers often have flex at offer stage.

Advanced Topics

Deep dives for advanced users

Pure salary sacrifice (especially for EVs) reduces gross salary before income tax and NI are calculated — saving both. This often beats a standard company car scheme because of the NI saving. If your employer offers both, ask specifically for the salary sacrifice option.

HMRC's current EV BiK schedule only runs to 2027/28. From April 2028, rates step up more aggressively. Choose a 3-year lease ending by March 2028 to lock in the current low rates.

A third option not covered here: use your own car and claim 45p/mile (first 10,000 business miles) via AMAP. For high business mileage this can beat both company car and cash allowance — but you carry all depreciation risk.

Cash allowance counts as pensionable salary at most employers, boosting your pension contribution and employer match. Company car does not. For long-term wealth, factor this in — 5% of £6,000 = £300/year extra pension on top of your decision.

Salary Sacrifice EV Net Cost, ULEZ Daily Cost, Car-Free Viability.

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