Company Car or Mileage Claim? The Answer Is Usually Electric
"Can I put the car through the company?" is among the most frequent director questions, and the honest answer for most of the last decade has been no. Electric vehicles changed that, and the reason is one number.
What a company car actually costs
If the company owns a car available for your private use, that is a taxable benefit. The charge is the list price when new multiplied by a percentage driven by CO2 emissions.
You pay Income Tax on the resulting figure at your marginal rate. The company pays Class 1A National Insurance on it. A £35,000 conventional car with typical emissions can generate a benefit of £10,000 or more a year — a higher rate taxpayer is paying £4,000 in tax annually for the privilege, before a mile is driven.
Against that, the company gets capital allowances on the purchase and deducts the running costs. For a petrol or diesel car those reliefs rarely cover the benefit charge.
Why electric changes it
Zero-emission vehicles attract a very low benefit percentage. The same £35,000 of list price produces a benefit measured in hundreds rather than thousands, and the tax on it becomes trivial relative to the company's deductions.
The percentages are legislated to rise gradually, so the position is not permanent and is worth confirming for the specific year you are buying in. But the gap between electric and conventional remains wide enough that fuel type, rather than price, is usually what decides the question.
The simpler alternative
Keep the car in your own name and have the company pay you for business mileage:
- 45p per mile for the first 10,000 business miles in the tax year
- 25p per mile above that
These payments are free of Income Tax and National Insurance in your hands, and deductible for the company. No benefit in kind, no P11D, no Class 1A. For a director doing meaningful business mileage in an ordinary car, this is very often the best answer and certainly the least administrative one.
Two different 45p figures
Worth separating clearly, because they are routinely confused. The 45p above is the approved mileage allowance payment for employees and directors using their own vehicle. The 55p you may have read about is the simplified expenses rate for the self-employed, which rose from 45p in April 2026. Different regimes, different rates, and using the wrong one produces a wrong claim.
How to decide
Three figures settle it: the list price and emissions of the car you have in mind, your marginal Income Tax rate, and your realistic annual business mileage. With those, the comparison takes minutes and gives a number rather than an opinion. If you are weighing up a purchase, it is worth doing before you order rather than after — the benefit charge follows the car, and it is not easily undone.
Getting help with this
AJH Accountants handles limited company for clients across the UK. We deal with HMRC, tell you what you can claim, and file on time, so nothing rests on you remembering a deadline. See how the service works, ask for a fixed-fee quote, or call the office on 01204 840303.
Originally published at ajhaccountant.co.uk/blog/company-car-or-mileage-claim-directors.
Quick answers
- A company car creates a taxable benefit based on list price and emissions.
- For petrol and diesel that benefit usually outweighs the tax saved.
- Electric cars carry a very low benefit percentage, which changes the answer.
- The company can claim capital allowances and running costs either way.
- The alternative is your own car, claimed at 45p a mile from the company.
- The 45p rate for employees and directors is not the same as the self-employed rate.
FAQs
Should I buy a car through my company?
For a petrol or diesel car, usually not. The benefit in kind charge is based on the list price and CO2 emissions and for most conventional cars it costs the director more in Income Tax, and the company more in Class 1A National Insurance, than the Corporation Tax relief is worth. For a fully electric car the benefit percentage is very low and the answer usually flips.
How is the benefit calculated?
List price when new, multiplied by a percentage set by CO2 emissions, gives the taxable benefit. You pay Income Tax on that at your marginal rate and the company pays Class 1A National Insurance on it. A £35,000 conventional car can easily produce a benefit of £10,000 or more a year before you have driven anywhere.
What if I use my own car instead?
The company can pay you 45p per business mile for the first 10,000 miles in the tax year and 25p after, free of tax and National Insurance. The company deducts the payments against its profits. There is no benefit in kind, no P11D and no complication — which is why it remains the default answer for most director-owned companies.
Is the director rate the same 55p as the self-employed one?
No, and this is a common confusion. The approved mileage allowance payment for employees and directors using their own car is 45p for the first 10,000 miles and 25p after. The 55p figure is the simplified expenses rate for the self-employed, which rose in April 2026. They are different regimes with different rates.
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Where this information comes from
This article was written using the following published sources, and was last reviewed on 6 September 2026:
- Expenses and benefits: company cars and fuel
- Calculate tax on company cars
- Travel — mileage and fuel rates and allowances
Please read this before acting on anything above
We have taken care to get this right and believe it to be correct to the best of our knowledge at the time of writing. Even so, we cannot guarantee that everything here is completely accurate or still current, and we do not accept responsibility for any loss arising from relying on it. Tax rules change, sometimes at short notice, and pages are not always updated the same day.
This is general information, not advice about your own circumstances. Two people with the same income can owe very different amounts. Please do not make a decision on the strength of this article alone. Check the sources above, do your own research, and reach your own decision — and where money or a filing deadline turns on it, speak to a qualified accountant who knows your full position first.