Company Car – Should I Buy A Car Through My Business?Written on June 12, 2025 by Kirk Rice LLP
If you’re a UK business owner considering buying a car through your limited company, it’s important to understand the tax implications—both for you personally and for your business. The decision can significantly affect your overall tax bill.
Company Cars Explained
When your company buys a car and makes it available for your private use, even if it is also used for business, it is classed as a “Benefit in Kind” (BIK). This means you will be subject to personal tax on the value of that benefit, and your company would also have national insurance due. The BIK value is calculated using:
- The car’s original list price (not the price you paid, even if it was second-hand)
- CO₂ emissions
- Fuel type
- Electric range (for plug-in hybrids and EVs)
The higher the emissions, the higher the benefit percentage and consequently the higher the tax due.
The Current Company Car Landscape
Company car tax rates are still based on CO₂ emissions. Here’s a quick summary of the 2025/26 BIK bands:
- 0g/km (pure electric): 3%
- 1–50g/km (plug-in hybrids): 3–15% (depending on electric range)
- 51–54g/km: 16%
- Over 55g/km: Gradually increasing up to 37%
Diesel powered vehicles may be subject to a diesel supplement of 4% on top of the emission-based percentages, not exceeding 37%.
For example:
- A 2025 fully electric SUV with 0g/km emissions and a £60,000 list price attracts a taxable Benefit-in-Kind (BIK) of £1,800 (3% of £60,000). A 40% taxpayer would pay £720 per year in tax.
- A petrol SUV with a £60,000 list price and CO₂ emissions of 200g/km is taxed at 37%, creating a BIK of £22,200. A 40% taxpayer would pay £8,880 per year in tax.
Employers also pay Class 1A National Insurance at 15% on the BIK value. If the company pays for your private fuel use, an additional fuel BIK is triggered, which can be costly. For the tax year 2025/26, the standard fuel benefit multiplier is £28,200, taxed based on emissions.
Who Should Consider a Company Car?
A company car can be a sensible option if the vehicle is used heavily for business travel, especially when it’s a low or zero-emission model. Leasing can also make sense in some cases, depending on how your business is structured and its ability to manage the tax and NI costs. The benefits tend to increase when the company can keep the car’s emissions, and therefore the Benefit in Kind, low.
However, if you are a higher-rate taxpayer and the car has high CO₂ emissions, it’s likely to be less tax-efficient. In many of these cases, buying the car personally and claiming mileage might be more cost-effective.
How Kirk Rice Can Help
At Kirk Rice, we regularly advise business owners on the pros and cons of purchasing vehicles through their company. Buying a car through your company can work in the right circumstances, particularly with zero-emission vehicles, but it’s rarely a one-size-fits-all decision. The tax rules are complex and subject to change, so it’s essential to get clear advice before you commit.
Thinking about a company car? Speak to one of our tax specialists today via info@kirkrice.co.uk
Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The information is based on current tax legislation which may change in future. The FCA does not regulate tax and trust advice.
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