Should I have a company car or own my car privately?

10th October 2018

This is a question we are asked a lot and usually the answer is “it depends!”

First a quick summary of the rules…….

Company car

You have a benefit in kind tax charge based on the list price of the car when new. This is then multiplied by a percentage depending on the CO2 emissions of the vehicle. In basic terms the more costly the car and the higher the CO2 emissions, the more tax you will pay. An electric car such as a Tesla has Zero emissions.

You can claim the following from the company for business trips:

  • Electric cars 4p per mile
  • Petrol/diesel cars up to 21p per mile

Assuming the vehicle is purchased and not leased, your company claim capital allowances on the cost at a rate of 1005/18%/8% depending on the CO2 emissions of the car. The lower the CO2 emissions, the quicker the company gets the tax relief.

Privately owned car

You do not have a benefit in kind tax charge but can instead claim a tax free allowance from your company for business trips to cover the cost of petrol and wear and tear. These rates are currently 45p per mile for the first 10,000 miles and 25p per mile thereafter. All running costs must be met personally by you.

Example

For example, it would be more tax efficient to buy a Tesla with zero CO2 emissions than a similarly priced Mercedes GLS with CO2 emissions of 210 g/km. Below is a comparison for your information and you will see that the benefit in kind tax charge is much lower the Tesla. In addition, the corporation tax relief is claimed much quicker on the Tesla. Please see below for a detailed comparison:

 

Example 1 - Electric car with no CO2 emissions    
Tesla Model 75 CO2 emission nil g/km    
           
Tax year to 5th April 2018/19 2019/20 2020/21    
P11D value £72,395 £72,395 £72,395    
Percentage charge 13% 16% 2%    
Benefit in kind £9,411 £11,583 £1,448    
Tax payable at 20% £1,882 £2,317 £290    
Tax payable at 40% £3,765 £4,633 £579    
           
Capital allowances claimed by company 100% year 1 £72,395 £0 £0    
Tax saving at 19% £13,755 £0 £0    
           
Example 2 - Diesel car with high CO2 emissions          
Mercedes-Benz GLS-Class GLS 350 d  CO2 emission 210 g/km
           
Tax year to 5th April 2018/19 2019/20 2020/21    
P11D value £71,275 £71,275 £71,275    
Percentage charge 37% 37% 37%    
Benefit in kind £26,372 £26,372 £26,372    
Tax payable at 20% £5,274 £5,274 £5,274    
Tax payable at 40% £10,549 £10,549 £10,549    
           
Capital allowances claimed by company 8% £5,702 £5,246 £4,826    
Tax saving at 19% £1,083 £997 £917    

 Conclusion

There is no doubt that the tax system currently favours “green” cars and it is being used to try and change peoples behaviour to the type of cars they buy. This is evident from the worked examples above.

 Of course, electric cars such as Tesla’s are generally more expensive to buy than their petrol/diesel alternatives and this needs to be factored in to your decision making.

 Please note that the above examples are for illustrative purposes only and you should seek detailed advice before making a final decision.