Company Cars and Tax

4. No Car or Your Own Car?

Some staff will be better off with a company car. It depends on what the company offers.

4.1 Some companies offer employees extra salary instead of a company car.

• This is worth considering if the company car has high emissions.

4.2 Some companies provide benefits for employees who use their own cars for business.

• These are normally paid as mileage allowances (see 4.3 or 4.4). The size of the allowance will be decided by the company.
• Companies may decide to pay the optional passenger rate of up to 5p a mile for each passenger. The passenger must be an employee who also needs to travel on business.

4.3 Employees who use their own cars usually receive a mileage allowance.

• If mileage allowances are paid in line with the HM Revenue & Customs (HMRC) Approved Mileage Allowance Payments (AMAP), there is no tax or NIC liability.
• AMAP for all cars (and vans) are 40p a mile for the first 10,000 miles, and 25p a mile thereafter.
• The rate for employees who use their own motorcycles for business is 24p a mile.

4.4 Employees who do not receive full mileage allowances may claim the balance as relief on their tax return (ie on the difference between the AMAP and the amount paid by their employer).

4.5 Employer contributions to the running costs of employees' cars are taxable, unless they are paid as a mileage allowance.

• But employees can claim a tax deduction, using AMAP.