🚗 Motoring & Vehicle Costs

The average UK car costs £3,500–£5,500 per year in running costs including fuel, insurance, road tax, servicing, and tyres. Depreciation adds considerably more. Fuel alone is typically £1,200–£2,000 per year depending on how much you drive and your car's efficiency.

Company car tax is charged when your employer provides a car for private use. HMRC calculates a Benefit in Kind (BIK) value — the car's P11D price multiplied by a CO2 percentage. You pay income tax at 20% or 40% on this BIK value. Electric cars have a low BIK rate (4% in 2026/27).

The standard annual rate is £195 for most petrol, diesel, and electric cars. Cars with a list price over £40,000 pay an additional £425/year for years 2–6. First-year rates for new cars are much higher for high-CO2 vehicles — up to £2,745 for cars emitting over 255g/km.

At home charging rates (around 24p/kWh), an EV typically costs 3–5p per mile in energy — vs 12–18p per mile for a petrol car. Annual savings of £1,000–£1,500+ on fuel are common. However, EVs cost more to buy and public rapid charging (65–85p/kWh) can eat into savings for drivers without home charging.

45p/mile for your first 10,000 business miles in the tax year, then 25p/mile. These Approved Mileage Allowance Payments (AMAPs) apply to private cars used for business — sole traders, employees, and directors. Use our Mileage Calculator to work out your full claim.

HP (Hire Purchase) spreads the full car cost over monthly payments — you own the car at the end. PCP (Personal Contract Purchase) has lower monthly payments because you only finance the depreciation; at the end you return the car, pay a balloon payment to buy it, or trade in. PCP is more flexible but can cost more overall if you always buy the car at the end.