What Is a Company Car?

A company car is a car that’s provided to you to use by your employer.

This can be solely for business use but is more commonly available for you to use in everyday life on personal journeys as well. It’s important that you check with your employer that you can use the vehicle for personal journeys and if there are any limitations that could affect you before you make any changes to your existing vehicle arrangement. For example, there may be a mileage limit and if you’re often driving for weekend breaks around the country then relying solely on your company car might not be a viable option for you.

For more information on the company car then you might also want to take a look at this guide.

Depending on your work driving needs you might instead be offered a company van, which is a similar benefit though has different tax implications as the tax you pay is based on a fixed sum rather than a variable one dependent on the vehicle.

Just like a company car you may also be able to use this vehicle for personal use, however because most vans only have one or two passengers seats and are larger and therefore have a lower fuel economy it might work out better for you to maintain a private vehicle for personal journeys.


Benefits of a Company Car

There are several benefits that a company car brings. Firstly, the vehicle will be in the business' name which means they will be responsible for keeping it in a safe and roadworthy condition. This includes ensuring any necessary maintenance and repairs are completed, it is serviced regularly and has a valid MOT if required. Though you should be aware that as the driver you will still have some responsibilities for monitoring and maintaining the vehicle day to day.

Secondly, the funding of the vehicle will also be the business’ responsibility so you will not need to worry about this. Additionally, the business will usually cover the additional costs associated with vehicle ownership and use, apart from fuel. Insurance, road tax where applicable, mot, servicing and repairs are what’s usually covered but you should check with your employer the exact details of who will be responsible for what.

Considerations with a Company Car

There are some drawbacks to accepting a company car and we think it’s important that as a first-time company car driver you are aware of these before accepting the vehicle so you make an informed decision on what is right for you.

If you accept a company car then it’s important to remember that the vehicle is tied to your job, so if you decide to change role or leave the company then you will be without a vehicle. If you have been offered a company car you should also ensure it is not dependent on you reaching certain targets, as if for some reason you do not hit the target then you may be left without a vehicle.

As the vehicle is in your employee’s name there may be restrictions or requirements that they place on the vehicle, both in terms of what vehicles you can choose from and how you use it. If you are planning to just use your company car for all travel then we advise checking that these restrictions will not place any limitations on your intended use.

Company Car Tax

Company car tax, also known as a benefit in kind (BIK) tax is a tax that you will pay for the use of the car.

Company car tax is calculated based on three factors; the vehicle’s emissions, the vehicle’s value and your personal tax bracket.

The emissions levels are broken down into bands to give you a BIK rate, which will be a percentage.

The P11D, which is the vehicle’s value including any additional extras but minus any non-taxable items such as the initial road tax, is then multiplied by the BIK rate.

Once you have this figure you will then need to multiple it by your personal tax rate, which will usually be 20%, 40% or 45%. This will give you the amount you will pay in company car tax annually.

Company car tax will be deducted from your monthly pay and so you will notice a reduction in your monthly income. It’s important that you consider the factors which will affect the amount you pay in company car tax when deciding on the right model for you as a more expensive or more polluting model will have a higher tax.

For a more detailed look at company car tax check out this guide.

How Can I Reduce My Company Car Tax?

The best way to reduce the amount you pay in company car tax would be to choose a model with a lower BIK rate, as the BIK rate is based on the CO2 emissions of the vehicle you should opt for one 

Alternatives to the Company Car

Your business may not offer a company car but an alternative car benefit such as the company car allowance or salary sacrifice. If your business offers a number of different benefits for you to choose from when it comes to your new vehicle then we'd recommend taking a look at this guide which compares the three main types. 


Is a Company Car Right for You?

This is a decision that you will ultimately need to make yourself as each person's circumstances are different and there is no general advice we can give that will be right for everyone.

What we do suggest is reviewing the pros and cons we've looked at above and taking a look at our other company car guides to make sure you fully understand what the company car could provide you with and the commitment you are making in taking one.

Which Company Cars are Available?

The cars you are able to choose from will depend on your business' policy and most will set a budget range for you to choose from. They may also put in place additional restrictions, for example not choosing a car that emits over a certain level of CO2 if they are trying to become a greener company. 

In order to know the cars you are able to choose from we advise speaking to your fleet management team as they'll be able to advise you on any restrictions to the available choices.

Which Model of Company Car Should I Get?

As we've already mentioned most companies will let you pick your company car provided it fits within their criteria so it's worth checking these first.

Another thing to bear in mind is that the more CO2 a vehicle emits the more you'll be paying in company car tax. Electric vehicles currently benefit from very low company car tax at just 1% for the current tax year of 2022/23 so its worth considering one if you are taking a company car.

We recommend checking out this guide to choosing the right car that will give you a detailed breakdown of what you need to think about when picking your new car.

We hope you’ve found this guide helpful in understanding the company car and whether you should accept one. If you want to learn more about company cars, company fuel tax, or your responsibilities as a company driver then take a look at our driver guides


Contact Wessex Fleet