Last updated: 14 October 2026
Should you buy your car through your limited company?
For an electric car, often yes. For petrol and diesel cars, usually not. If the company buys a car you use privately, you pay benefit in kind tax on a percentage of its list price, and the company pays Class 1A NIC at 15%. Electric cars have very low rates, 4% in 2026/27, and the company can claim a 100% first-year allowance on a new one. For a petrol car, the benefit rate can be up to 37%, which often makes it cheaper to own the car personally and claim mileage.
Benefit in kind rates for 2026/27
| Car | BiK rate |
| Electric (0g/km) | 4% |
| Hybrid, 1–50g/km | 4% to 16%, depending on electric range |
| Petrol, 100–104g/km | 26% |
| Petrol, 155g/km and above | 37% (diesels without RDE2 pay 4% more, capped at 37%) |
Electric car rates rise to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30.
Electric car example
Laura’s company buys a new electric car with a list price of £45,000.
- Company claims the 100% first-year allowance, saving corporation tax of up to £11,250 at 25%
- Laura’s benefit is 4% × £45,000 = £1,800, so at 40% she pays £720 tax a year
- The company pays Class 1A NIC of £270
That’s much cheaper than buying the car personally out of taxed income.
Petrol car example
If the car were a petrol car with 150g/km emissions and the same list price, the BiK rate would be 36%. Laura’s taxable benefit would be £16,200, costing her £6,480 a year at 40%, and the company £2,430 in NIC. Owning it personally and claiming 45p a mile for business journeys is likely to be better.
Fuel
If the company pays for private fuel in a petrol or diesel car, there’s a separate fuel benefit charge, based on £29,200 in 2026/27 multiplied by the car’s BiK rate. Electricity isn’t treated as fuel, so charging an electric car at work is tax-free.
Salary sacrifice and leasing
Many companies lease cars, often through salary sacrifice. For electric cars, the benefit in kind rules give tax savings. For other cars, the optional remuneration rules mean you’re taxed on the higher of the BiK and the salary given up.
VAT
VAT on buying a car is usually not recoverable if there’s any private use. For leased cars, 50% of the VAT on lease rentals can be reclaimed.
Common mistakes
- Choosing a company car based on the purchase price instead of the total tax cost over several years
- Forgetting to report the car on form P11D, or to payroll the benefit
- Paying for private fuel in a petrol car without realising the fuel benefit charge applies
- Not keeping a mileage log when claiming business mileage for a personal car
Frequently asked questions
Can I use my car for the business without the company owning it?
Yes, and claim mileage allowances.
What if I’m a sole director?
The same rules apply.
Does a van count?
Vans have a fixed benefit, which is zero for electric vans.
Can I buy the car from the company later?
Yes, at market value.
Related: benefit in kind on buying a car through a company, electric car private use and mileage rates for electric and hybrid cars.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with company cars and benefits. See our limited company accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
