Never ever get a car just to save the tax. If you’re buying or leasing a car to save tax, that’s a bad idea. That’s the tail wagging the dog. Get a car because you need a car. Tax is the side-effect, not the reason.
Now, here’s where the fun ends. The company car regime isn’t there to help you. It’s there to bleed you dry, smiling politely while it does it. And nothing exposes this faster than believing the marketing hype around “hybrids.”
A mild hybrid isn’t green. It isn’t clever. It’s a diesel with a Duracell stapled to the side. You can’t plug it in. You don’t get the perks. What you do get is HMRC leaning over your desk, whispering: “That’s a lovely pay slip you’ve got there. Shame if something happened to it.”
Tesla Model 3 (EV)
P11D around £40,000. BIK at 3% = £1,200 taxable. At 40%, that’s £480 a year. The employer pays Class 1A NIC at 15% – £180. VED? Nothing. Salary sacrifice? Perfect. This is the lightest of shakedowns. It’s like being mugged by a toddler who only wants the loose change in your pocket.
Audi Q8 Diesel Mild Hybrid
P11D around £75,000. BIK at 37% = £27,750 taxable. At 40%, that’s £11,100 a year. The employer pays Class 1A NIC at 15% – £4,163. VED? Over £2,000 in year one, then £570 each year just to remind you of your mistake. Salary sacrifice? Don’t even think about it. And if you’d ticked the box for the optional “Audi indicator” pack, you’d be staring at £80,000 instead.
One of my clients bought one two months before he met me. He thought “hybrid” meant low tax. What it really meant was “financial suicide with heated seats.” When we ran the numbers, it turned out it was cheaper for him to park the Audi, make it SORN, and lease two Teslas instead. Imagine that: two cars on the drive for less than one Audi on the road. That’s not planning. That’s a crime scene.
This isn’t a mugging. This is being dragged into a basement, stripped of your wallet, and then invoiced for the hire of the baseball bat.
My 12-Year-Old Lexus GS250 (Petrol)
Here’s where it gets personal. I own a Lexus GS250 that’s 12 years old. It’s worth maybe £7,000 on a good day, if the buyer squints. HMRC doesn’t care. They tax it off the original list price of around £35,000. With emissions north of 180g/km, that’s a 37% BIK. Taxable value £12,950. At 40%, that’s £5,180 of my money gone every year. Add another £1,943 in Class 1A NIC from the company. In one year, I’d be paying more in tax than the car is even worth.
That’s why it stays private. I claim mileage when it’s used for work, and I leave HMRC to find their pound of flesh elsewhere.
The Rule of Thumb for Business Owners
- Electric → Yes
- Plug-in Hybrid → Yes, probably
- Mild Hybrid → No, probably
- Petrol → No
- Diesel → No
The Grim Takeaway
One choice leaves you with a light slap on the wrist. The other leaves you face-down in the car park, teeth in the gutter, while HMRC rifles through your pockets and charges your employer for the privilege.
The company car regime doesn’t reward sense. It doesn’t reward thrift. It doesn’t even reward loyalty to the badge on your bonnet. It only rewards plug sockets and low emissions. Anything else is just you volunteering to be the punchline in someone else’s very expensive joke.
