Short answer
The company can buy a car, but private use creates a benefit in kind taxed on list price × a CO2-based percentage. Electric cars are taxed at very low percentages and often make sense. Petrol and diesel cars rarely do.
Corporation tax
Can my limited company buy a car and is it tax efficient?
A company car creates a benefit in kind based on CO2 emissions. Electric cars are usually efficient, petrol and diesel usually are not. The comparison in full.
Written and reviewed by Waqas Sagar Member of ICAEW, Fellow of ACCA, Fellow of AAT, a double graduate and entrepreneur at heart, helping startups grow and serving thousands of businesses nationwide with an excellent team. Published by LimitedCompany.Accountants, 12 London Road, Morden, London SM4 5BQ. Reviewed 12 September 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
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The company can buy a car, but private use creates a benefit in kind taxed on list price × a CO2-based percentage. Electric cars are taxed at very low percentages and often make sense. Petrol and diesel cars rarely do.
01
Electric versus combustion
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The alternative: mileage on your own car
Electric versus combustion
A fully electric car has a benefit percentage in the low single digits, rising by a point or two each year under the published schedule, and a new electric car generally qualifies for a 100% first year allowance, so the company deducts the full cost against profit immediately. Employer Class 1A NIC applies to the benefit value.
A petrol or diesel car can carry a benefit of 25% to 37% of list price, taxed on the director personally each year, with capital allowances restricted to 6% or 18% writing down. The tax usually exceeds the benefit of company ownership.
The alternative: mileage on your own car
Owning the car personally and claiming 45p a mile for the first 10,000 business miles and 25p thereafter is simple, tax free, and gives no benefit in kind. For most directors driving modest business mileage in a combustion car, this beats company ownership.
Vans are treated differently, with a fixed benefit charge and no charge at all where private use is insignificant, which makes a genuine commercial vehicle far simpler than a car.
Before you act
Rates, thresholds and deadlines quoted here reflect the 2026/27 UK position and current Companies House and HMRC guidance. Check GOV.UK, or ask us, before relying on them for your own company.
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Frequently asked
Can my limited company buy a car and is it tax efficient?: questions directors ask
Can the company pay for charging?
Yes. Workplace charging and company-funded charging of a company car are generally not additional taxable benefits.
What about a car on lease?
Lease payments are deductible with a 15% disallowance for higher emission cars, and the benefit in kind rules still apply to private use.
Does insurance and servicing get covered?
The company can pay running costs on a company car, deductible for corporation tax, though fuel for private mileage creates a separate fuel benefit.
What records are needed for can my limited company buy a car and is it tax efficient?
Keep bank statements, sales and platform reports, purchase invoices, payroll records, VAT workings, finance agreements and Companies House correspondence. We confirm the exact list at onboarding and identify gaps before a filing deadline becomes urgent.
How much does help with can my limited company buy a car and is it tax efficient cost?
The fee depends on transaction volume, record quality, VAT and payroll requirements, historic catch-up and the level of reporting needed. We agree a fixed scope and price before technical work starts, with published packages available on our fees page.
Can you take over can my limited company buy a car and is it tax efficient from another accountant?
Yes. We request professional clearance, collect the prior records and authorities, check the next Companies House and HMRC deadlines, and give you one clear handover list. The process is normally completed remotely.
Can can my limited company buy a car and is it tax efficient be handled online?
Yes. We work through secure cloud records, scheduled reviews and digital approvals, while keeping a named team available by phone, video call and email. Clients can also visit our Morden office by appointment.
Which accounting software works best for can my limited company buy a car and is it tax efficient?
We regularly work with Xero, QuickBooks, FreeAgent, Sage and connected sales or expense apps. The right setup depends on transaction volume, integrations and the reports you need, not simply the software brand.
What tax deadlines matter for can my limited company buy a car and is it tax efficient?
The relevant calendar may include annual accounts, Corporation Tax payment and return dates, confirmation statements, VAT returns, payroll submissions and Self Assessment. We map the dates from your company year end and registrations.
Is this can my limited company buy a car and is it tax efficient guidance personal tax advice?
No. This page explains general UK rules and common accounting treatment. Your facts, contracts and wider tax position must be reviewed before you rely on a conclusion.
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Check the current rules
Use official information as your reference point.
Deadlines, thresholds and filing rules change. GOV.UK and Companies House publish the current statutory position; advice should then be applied to your company’s circumstances.