Running a car through the company can be quite expensive from a tax point of view, unless you opt for a fully electric vehicle. A car is almost always deemed to have private use whether you actually use it privately. Merely being able to access the keys at your home, can be sufficient for HMRC to counter that a car is available to use.
Pool cars
The only exception for this strict "available" interpretation would be pool cars. It is quite difficult to satisfy this if you hold the keys at home and can drive the vehicle at any time if you wished too. A pool car must be available to all employees and there must be no personal use. A good example of this would be where the employees drive to work in their own vehicle, use a company car to visit customers, hand the keys back of the pool car at the office, before returning home in their own vehicle. HMRC can easily look up the mileage of any motor vehicle from MOT/Service records and compare this to dates, places and time of refueling as well as comparing with the sales invoices. If the company has a sole director-shareholder or perhaps joint with a spouse, HMRC are unlikely to accept a car is part of a pool. In recent cases HMRC have considered whether a journey is "business dominant" or "business incidental". A journey for a hospital appointment would not be incidental to posting a business letter while on route as the dominating purpose is personal.
Benefit in kind on cars
The benefit in kind is calculated on the brand-new list price of the vehicle and not what you actually paid for it and does not account for actual private use. The benefit is a % based on the emissions of the car and can be as much as 37%. So a car with a brand-new list price of £40k could have a benefit in kind of £14,800 a year, and this will be taxed at your marginal rate. So using this example a higher rate taxpayer would have to pay approximately 14,800 * 40% = £5,920 in personal tax and the company would also have to pay Class 1ANIC at 13.8%; 14,800*13.8% = £2,042 (2024/25).
There is an additional benefit in kind tax if fuel is provided for private use.
However, the rules are different for vans and the benefit in kind charge is considerably lower. It is also only charged if there is actual private use.
Double cabs - rule change from April 2025
Some pick-up style double cabs used to be classified as vans, rather than cars. This was changed in the Autumn 2024 budget and double cabs have been reclassified as cars again from April 2025. Transitional rules will be in place for those who already own a double-cab until 5 April 2029. You can read about vans here.
Claiming business mileage in your car
If you do significant business mileage, it will usually still be more tax efficient to run a personal car and claim 45 pence per mile (first 10,000 miles) and 25 pence thereafter.
Mileage allowances paid at this rate are completely free of tax and NIC and will attract corporation tax relief in the company.
However, if you have an idea of the vehicle you may consider hiring or buying, please provide the following details, and we will be happy to prepare a calculation to see if it would be tax efficient to run this vehicle as a company car
Make & Model of the Vehicle
Date it was first registered
Original list price
Any additional upgrades
CO2 emission figure for the vehicle
Electric range if a hybrid
Will fuel for private use be provided if taken as a company car?
Method of purchase - hire / outright purchase
If you were to buy personally, would you have to withdraw the costs as dividends from the company, or do you have funds already available?
If contract hire - monthly hire costs
If hire-purchase / contract purchase, the deposit and monthly hire costs
Estimated annual servicing / maintenance costs
Total annual business mileage
Total annual private mileage
Estimated annual insurance cost
Subsequent calculations for revised data will be chargeable at £60+vat per calculation.