Reviewed by Mustafa Bilgic
Founder, WebCalculator
Tax rates per HMRC (gov.uk/income-tax-rates). AMAP 55p/25p confirmed for 2026/27. BIK rates per gov.uk/company-car-tax. Not financial advice.
A car allowance tax calculator for the UK that shows how much of your car allowance you actually keep after Income Tax and National Insurance. Enter your base salary and car allowance for 2026/27, and the calculator breaks down the tax on the allowance separately so you can see the real take-home value.
What you keep after tax & NI
A car allowance is a cash payment added to your salary in lieu of a company car. HMRC treats it as earnings, so you pay Income Tax and National Insurance on the full amount — exactly like a pay rise. The calculator works by comparing your tax position with and without the allowance:
A basic-rate taxpayer (20% tax + 8% NI = 28%) keeps about 72p of every £1 of car allowance. A higher-rate taxpayer (40% + 2% = 42%) keeps about 58p.
If you use your own car for business travel, you may also claim mileage at the AMAP rate of 55p per mile for the first 10,000 miles and 25p after that (2026/27, up from 45p). If your employer already reimburses mileage, you can only claim the shortfall. The mileage allowance calculator shows the relief available.
| Car allowance | Company car (EV, 4% BIK) | |
|---|---|---|
| Taxable benefit | Full amount | P11D × 4% |
| NI due? | Yes (full) | No employee NI |
| Running costs | Your responsibility | Employer pays |
| Best for | High-emission cars | Electric/low-CO2 cars |
An electric company car with a £40,000 list price has a BIK of just £1,600 (4%), costing a basic-rate taxpayer £320 a year in tax and no NI. A £5,000 car allowance costs the same taxpayer about £1,400 in tax and NI. Use the company car tax calculator to compare both options for your specific vehicle.
The company car tax calculator works out BIK on a specific vehicle. The salary calculator shows your full tax breakdown. The mileage calculator shows AMAP claims at 55p/25p.
A car allowance is treated as salary for tax purposes. You pay Income Tax at your marginal rate (20%, 40% or 45%) and Class 1 National Insurance (8% up to £50,270, 2% above). A basic-rate taxpayer keeps about 72% of the allowance; a higher-rate taxpayer keeps about 58%.
It depends on the car's CO2 emissions. A fully electric company car has only a 4% BIK rate in 2026/27, making it very tax-efficient. A petrol or diesel car with high emissions can have a BIK rate above 37%, in which case a car allowance may be cheaper. Use the calculator alongside the company car tax calculator to compare.
If your employer pays less than the AMAP rate (55p per mile for the first 10,000 miles from April 2026, 25p above) you can claim tax relief on the shortfall. If you receive a car allowance but no mileage reimbursement, you can claim the full AMAP rate for business miles.
Yes if your pension is based on total pay. Because a car allowance counts as salary, it increases your pensionable pay — so both your contribution and your employer's contribution rise. This can be a hidden benefit.
From 6 April 2026 the Approved Mileage Allowance Payment (AMAP) rate for cars and vans is 55p per mile for the first 10,000 business miles and 25p per mile after that. This was increased from 45p — the first change since 2011.
Yes. A car allowance is treated as earnings for both Income Tax and Class 1 NI. The combined marginal rate for a basic-rate taxpayer is 28% (20% tax + 8% NI) and for a higher-rate taxpayer is 42% (40% tax + 2% NI).