Should I buy my next car through my company or personally?

How does it work if my company buys my car? 

If your company buys a car and makes it available for the use of an employee – which includes you as a director -, it becomes a company car. This creates tax consequences for both the business and you as the individual. 

What is a benefit in kind? 

A benefit in kind (BIK) is a non-cash benefit provided for an employee or company director by an employer. If your company provides you with a company car and you are permitted to use it for any private use, including commuting, you’ll pay tax on the car because it’s treated as a BIK. The amount of tax you pay depends on the car’s taxable value, the BIK rate and your income tax band. HMRC offers an online company car tax calculator to help estimate the amount due. 

Are there any tax advantages to Electric Vehicles as company cars? 

Electric Vehicles (EVs) currently benefit from very low BIK rates, making them particularly attractive for company directors and employees. As of the 2025/26 tax year, the BIK rate for a zero-emission vehicle is 3%, compared to 31% for a petrol car with emissions of 128g/km, such as a BMW X1. That difference can amount to thousands of pounds in tax each year. BIK rates for EVs will gradually rise by 1% each tax year until 2027/28 and then 2% per year, reaching 9% by 2029/30. For hybrid cars, rates increase more steeply, up to 19% by 2029/30. So, while EVs remain tax-efficient, the advantage will lessen slightly over time. 

Keep in mind that fuel benefit tax also applies where the company pays for fuel used on private journeys by an employee or director.  

How do capital allowances work on cars? 

If your company buys the car, it can either buy it outright or through a lease. 

Where the car is bought outright, the company can claim a 100% tax deduction if the car is a brand-new zero-emissions vehicle. For a petrol, diesel or second-hand electric car, an annual writing down allowance is available at either 18% or 6% of the car’s value, depending on the car’s CO2 emissions.  

If your company leases the car , the cost of the lease is a deductible expense. If the CO2 emissions exceed 50g/km, there is a simple 15% disallowance, which means that 85% of the lease cost would be deductible.  

If your company is registered for VAT, the VAT is recoverable on the leased car, which is capped at 50% if there is any private use. If the car is used solely for business purposes, 100% of the VAT may be recoverable. 

The rules are complex for cars acquired under hire purchase arrangements, so you should ask your accountant about this. For more detail on ways to purchase a business vehicle see our article here.  

What about simplified expenses? 

Simplified expenses are an alternative way of calculating taxable profits for sole traders and partnerships. A flat rate is claimed for business mileage which also covers buying and maintaining the vehicle. If you use simplified expenses, you cannot claim capital allowance for the car too. 

If I buy my own car, can I claim costs from my company? 

If you use your own petrol or diesel car for work, the company can reimburse you up to the  Approved Mileage Rate or you can claim tax relief personally up to this rate. The rate includes both the fuel cost and the cost of running your car. It is quicker and simpler for the company to reimburse you those costs. 

For the first 10,000 business miles driven in the tax year, you can claim 45p per mile, and this reduces to 25p per mile once you go over 10,000 business miles.  

For your own electric car, the Advisory Electric Rate applies and is reviewed by HMRC quarterly. From 1 September 2025 HMRC introduced dual rates: 

What about HMRC’s Employee Car Ownership Schemes? 

In October 2026, new rules will come into effect for Employee Car Ownership Schemes (ECOS) meaning they will be treated as a BIK like other company cars 

Under ECOS, a company provides a car to an employee, and ownership of the vehicle is transferred to the employee immediately. Currently under this scheme, employees are currently taxed under the beneficial loan rules rather than the BIK rules, which reduces the taxable benefit significantly. ECOS arrangements have been particularly popular in the motor industry but were widely regarded as a means of exploiting a tax loophole. 

Which option is right for you? 

The right option for you will depend on your business structure, tax bracket, car type, and how much you drive.  

EVs often make more sense through a company because of their low BIK rates, while petrol/diesel cars may be more efficient to own personally. 

Also consider factors such as your company’s profitability and cash flow because this will impact the decision.  

Where can I get further support? 

At TaxAssist Accountants, we can guide you and your business through your options.  

If you need any help or assistance with your personal or corporate tax affairs, call us on 0203 827 6000 or use our online enquiry form here. 

Last updated: 30th October 2025