‘Company car taxation’

Why employees prefer cash to the company car option

Thursday, April 26th, 2018

Why more employers are choosing cash over a company car

Have you ever been given the choice of receiving a company car or taking the cash equivalent? Until fairly recently, it made good financial sense for both employers and employees to take the car option.

Tax incentives were in place to make it even more attractive to select an environmentally-friendly car as the taxable Benefit In Kind (BIK) is based on the car’s CO2 emissions.

However, diesel cars were initially hit with a 3% surcharge over and above petrol equivalents, which now stands at 4% (for cars not reaching the RDE2 standard), increasing the (BIK) for the employee and National Insurance charges for the employer.

Some critics argue that it doesn’t add up, environmentally, as for years we were encouraged to buy diesel cars which produced less pollution yet now there is little financial incentive to do so compared to non-diesel alternatives.

So, the environment aside, what are the pros and cons of taking a company car as opposed to the cash?

Company car


  • It’s often less stressful – admin is taken care of by the employer’s leasing company
  • Insurance is covered, and often breakdown costs too
  • You choose from modern cars offering the latest technology
  • No need to worry about selling the car at the end of a lease


  • You have no asset, so receive no cash when you hand the car back
  • There are fewer car options and choices are dictated by the employer/lease company
  • If only diesel cars are available, you could be penalised by the 4% surcharge

Taking the cash


  • You can spend it on what you like; it doesn’t have to be a car!
  • You’ll have an asset to sell and can realise some cash at the end of the car’s use
  • You’ll get far more choice over what car you can drive (although your employer may specify a ‘standard’)
  • It should work out cheaper at the moment based on current surcharges


  • You’ll need to budget for all costs, including tax, insurance, maintenance etc
  • All admin and running of the car is your responsibility
  • You could be committed to a purchase/hire agreement if your employment comes to an end


Employers should also be aware that if they offer employees a choice of either cash or company car, they could be subject to Optional Remuneration rules which can further complicate issues. We are seeing more companies giving staff no choice in the matter in order to simplify and streamline their tax position.

If you would like to discuss your company’s tax position with respect to company cars, or for advice on employee benefits, please contact [email protected] or call 01527 558539. We offer a full range of personal tax and employer tax services.

company car taxation

company car taxation

Company cars and tax efficiency

Thursday, May 12th, 2016

Company car tax can be confusing at the best of times, which is why more and more businesses are seeking guidance and support in picking the right make and model to fit their needs and budget.

According to tax partner Julia Whelan, at tax specialists Curo Chartered Accountants, there are many businesses across the UK wasting thousands of pounds annually, simply by purchasing and running company vehicles which are inefficient for tax purposes.

But what is company car tax and how can organisations become more shrewd and selective in order to save money whilst maintaining their operational efficiency?

Advises Julia, “there are several factors for both employers and employees to consider when choosing a company car, including

  • how and why the make and model of a car affects its tax rate
  • legislation that introduced new car tax bands
  • the Government subsidy which encourages eco-friendly driving
  • the vehicles that could save you thousands of pounds”

When it comes to company car tax, choosing a car which is cost-effective can be a long and time consuming process. Get it wrong and you could be just throwing money away.

Adds Julia “Of course, if employers don’t choose wisely, they may end up with unhappy employees who face higher tax bills”.

Businesses need to know the facts when choosing their cars otherwise the financial implications could hit them hard – picking the right vehicle means they are less likely to be ‘driven round the bend’ with P11ds and tax returns!

If you would like advise on company car taxation from both the employer and employee perspective, please contact Julia Whelan on 01527 558539 or [email protected]