A company car is a vehicle provided by an employer to an employee that may also be used for private purposes. As this is considered a benefit in kind (BiK), it is subject to taxation. The rules surrounding company cars are strict, and accurate documentation — particularly a Driving log — is essential for correct tax reporting and for determining the correct benefit-in-kind value.
A company car is essentially a business vehicle that is also available for private use. It can be used for both business and personal journeys, for example commuting, shopping or holidays.
When the car is used privately, it is treated as a taxable benefit in kind and taxed according to HMRC regulations.
The taxable benefit value is calculated based on factors such as the vehicle’s list price, CO₂ emissions, fuel type and availability for private use. The benefit value is added to the employee’s taxable income and affects both income tax and employer National Insurance contributions.
Accurate journey records via a Driving log are therefore crucial to demonstrate business versus private mileage and to ensure compliance with HMRC requirements.
Under HMRC rules, the taxable benefit in kind (BiK) value of a company car is primarily based on:
The vehicle’s list price (P11D value)
CO₂ emissions
Fuel type (petrol, diesel, hybrid, electric)
The applicable BiK percentage set by HMRC
Optional extras included in the list price
For fully electric vehicles, lower BiK percentages apply compared to petrol or diesel vehicles. The taxable benefit is calculated by multiplying the P11D value by the relevant BiK percentage. The resulting figure is the annual taxable benefit added to the employee’s income.
The exact tax payable depends on the employee’s income tax band (e.g. 20%, 40% or 45%).
If the employer also pays for fuel used for private journeys in a company car (for example via a fuel card), a separate fuel benefit charge may apply.
This fuel benefit is taxed independently of the car benefit and is calculated using HMRC’s fixed fuel benefit multiplier and the car’s BiK percentage.
It is therefore essential to keep accurate records of business and private mileage in a Driving log. Without proper documentation, all employer-paid fuel may be treated as a taxable private benefit.
Under HMRC rules, a reduced taxable benefit may apply in certain circumstances:
If the company car is genuinely unavailable for private use (other than ordinary commuting), the taxable benefit may be reduced or may not apply at all. The restriction must be formal, documented, and enforced by the employer.
If the car is unavailable for private use for 30 consecutive days or more (for example due to repair, employee leave, or the vehicle being returned), the benefit-in-kind charge may be reduced proportionally.
If the employee makes payments towards private use of the car, this can reduce the taxable benefit amount.
To ensure any reduction is accepted by HMRC, accurate documentation is essential — ideally in the form of a Driving log clearly showing dates, journey purpose, mileage and odometer readings.
Proper records are critical to demonstrate business versus private use and to ensure correct taxation.
Although there is no strict legal requirement to keep a Driving log, HMRC requires clear and accurate records if you want to:
Avoid company car benefit charges (e.g. where private use is restricted)
Claim a reduced benefit-in-kind value
Report fuel benefit correctly
Support business mileage claims
Clear documentation is essential to demonstrate the distinction between business and private use.
Date and time of each journey
Start and end addresses (or sufficient location details)
Purpose of the journey (business or private)
Odometer reading at the start and end of the trip
Total distance travelled
Driver’s name (where multiple drivers use the vehicle)
Maintaining a complete and accurate Driving log ensures compliance and reduces the risk of tax reassessment or penalties.
Keeping a Driving log manually is not only time-consuming — it also increases the risk of errors, missed journeys or incomplete documentation. A digital Driving log provides both the driver and employer with a secure and efficient tool to ensure compliance with HMRC rules.
Automatic trip recording via GPS or vehicle module (OBD or battery-connected device).
Clear separation between business and private journeys.
Documentation to support reduced benefit-in-kind claims, where applicable.
Accurate fuel allocation – helping to avoid unnecessary tax charges.
Protection in the event of a tax review – documentation is always complete.
Time savings for drivers and finance departments.
Cloud-based archiving – securely stored for at least 6 years in line with UK record-keeping requirements.
Integration with accounting and payroll systems.
A digital Driving log reduces administrative burden while strengthening compliance and financial control.
A company car is a taxable benefit that requires accurate reporting. A digital Driving log is the simplest way to:
Ensure the correct benefit-in-kind value
Avoid unnecessary costs
Report journeys and fuel correctly
Protect both employees and the business in the event of a tax review
Want to make compliance with HMRC rules simple?
Choose a digital Driving log — for security, simplicity and full control.
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