Company Car vs Cash Allowance Calculator
Work out what a company car costs you in tax and charges, then compare it with a cash car allowance from the same employer.
With the company car
With the cash allowance
Verdict
Guide
Plenty of employers offer a choice: a company car, or the same thing in cash that you can spend as you like. The two are rarely worth the same amount.
Why a company car is not free
The car is a benefit in kind, so you pay income tax on a percentage of its list price. Your employer can also charge you a company car charge, which is 20% to 45% of that benefit depending on your earnings.
Why cash is not free either
A cash car allowance is taxed as pay, so it attracts income tax and employee National Insurance. On top of that, you still need to pay for a car and its fuel if you take it.
The one that usually wins
Cash wins on tax, because the allowance is taxed at your marginal rate while a company car is taxed at the BIK percentage of the list price, which is often far lower. The car wins if you would otherwise have to hire or lease a vehicle, or if your employer provides fuel.
Watch the fuel
If your employer provides private fuel, you pay a separate fuel benefit charge on the car. Take the cash and you pay the fuel bill yourself instead. That difference often decides the answer on its own.
Company Car or Cash: What to Watch
The tax figures are only half of it. These are the other things worth checking before you choose.
1. List price, not what you paid
The benefit is based on the price when new, including VAT and options, whatever discount your employer negotiated.
2. The car charge is negotiable
Employers can charge 20% to 45% of the benefit. A lot of them charge less than they are allowed to, and some charge nothing at all. Check your contract.
3. Fuel can flip the answer
Free private fuel is taxed at the fuel benefit multiplier, which is £29,200 for 2026/27. On a high BIK band that is thousands of pounds a year.
4. Cash means paying for a car
If you would otherwise pay for a lease, finance or hire costs, put them into the cash option. Otherwise the comparison flatters cash.
5. Business mileage
Business mileage in a company car is generally not taxable. In a cash allowance, you get back less than you spend on running a car for work.
6. Salary sacrifice
Some employers run salary sacrifice schemes for electric cars. The rules are different again, so check the scheme rules rather than assuming this comparison covers them.
This calculator provides estimates for guidance only. Income tax and National Insurance figures assume the rates for England, Wales and Northern Ireland, and Scottish bands differ. For decisions on tax, finance or legal matters, check with the relevant official source or a qualified adviser.