July 4, 2024
Sara Davies
Whether or not a company car can be used for personal journeys is a common question asked by employees considering taking advantage of a company car. Although, there isn’t one single, clear answer to this question, more often than not, the short answer is yes!
Fleet car drivers are usually able to use their company car for personal travel. However there are several considerations you’ll need to take into account. Read on to find out more about company cars, types of schemes, usage and the rules.
What is a Company Car?
There are a number of different schemes that businesses provide, ranging from giving you access to a company vehicle, through to funding one for you. The most common is where the car is in the business name but is yours to drive.
The three main types of provision made by employers are:
1. A Company Car
There can be many benefits to accepting a company vehicle, especially if you are able to use it for your private journeys as well. There is usually the option to do this with the benefit that you will no longer need to keep a separate private vehicle as well which will save you money.
A company car will be maintained, serviced, taxed, and insured by the business which means you will not need to pay these additional costs associated with vehicle ownership either. Not only is that a financial benefit but it can also reduce the stress that comes with managing a vehicle. If you do not currently have your own vehicle it offers you the freedom that comes with having a car at your disposal.
2. A Company Car Allowance
This is where an employer gives you a cash allowance in order for you to source and maintain a vehicle. It is up to you how the money is spent, provided it goes towards keeping you mobile, and so you can decide whether you use it towards an existing vehicle or for a new one.You must ensure the vehicle is maintained and kept roadworthy.
In this scenario you will also of course be allowed to use your vehicle for personal trips.
3. A Salary Sacrifice Agreement
You will exchange a percentage of your gross salary for a benefit with a monetary value, in this case a car. In this scenario, you lease the car from a third-party supplier who has partnered with your employer and the amount of the lease will be what is deducted from your monthly salary.
As the vehicle is in your name, you will be responsible for ensuring that it is in a safe roadworthy condition, any servicing and maintenance work is completed promptly and that it is insured, as well as any additional conditions your employer may require.
Salary sacrifice schemes also allow employees to use the cars for personal journeys.
To find out more detail about these various vehicle benefits offered by employers, visit our detailed guide.
For the remainder of this article we’ll be focusing on the first option explored above when your employer provides you with a car to drive.
When Can I Drive My Company Car?
Unless it’s otherwise stipulated a company car will be yours to drive when you want as it will be for your personal and business use. This means that you can drive it whenever you want, within reason.
One thing to be mindful of if you travel a lot in your car is that you’ll usually need permission to take a company car abroad. If you’re in a lease car this will be a VE103 from the funder or if the vehicle is owned outright by your company then a letter from the business stating you are authorised to drive the car.
You will usually be able to get a second driver added to your vehicle, but you’ll need to check with your fleet manager on the process for this.
Considerations When Using a Company Car for Personal Journeys
1. Company Car Tax
If your company provides you with a car you are able to use outside of business journeys then you will need to pay company car tax, also known as Benefit in Kind (BIK) tax. When deciding on whether to accept a vehicle you’ll need to think about the company car tax and see whether it is economically the best choice for you. The tax will usually be deducted from your monthly salary, reducing your take-home pay.
2. Mileage Restrictions
As the business is the owner of the vehicle or leaseholder of the contract, they may set additional restrictions including the annual mileage and this may restrict you regarding how much you can use the vehicle for personal journeys.
Other Considerations When Accepting a Company Car
1. Leaving the Business
The vehicle will be in the company’s name so if you leave the business then you will no longer have use of the vehicle.
2. Responsibility for Checks and Maintenance
You will usually be asked to complete basic maintenance checks and work to ensure it runs correctly. These will usually include checking the fluid levels, tyre condition and pressure, and general vehicle condition. You’ll be responsible for flagging repairs needed with your fleet manager or if any warning lights appear on the dash for maintenance or servicing work.
3. Make and Model Restrictions
Your employer might place restrictions on your company car. These can be in terms of what models are available for you to choose from or how the vehicle is used and the condition it should be kept in. They may include restrictions regarding the value and emission levels of vehicles available to choose from.
4. Driver Restrictions
There may be other driver restrictions imposed relating to aspects including speed limits and parking conditions.
More About Company Car Tax
Company car tax is calculated using three factors:
- The vehicle’s emissions
- The vehicle’s P11D (the vehicle’s value including any additional extras but minus the non-taxable items)
- Your personal tax band
So, you’ll need to consider the emission level and value of any vehicle offered to you, so you can calculate the tax you will be paying and whether this makes financial sense for you.
For a more detailed breakdown on how company car tax is calculated take a look at this dedicated guide.
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