Company Car or Mileage Claim? The Answer Is Usually Electric

Putting a petrol car through the company is usually a mistake. Putting an electric one through it usually is not, and the difference is the benefit in kind percentage.

Illustration comparing a company car with a personal mileage claim for directors

"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:

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.

The rate rose to 55p in April 2026

It had been 45p for the first 10,000 miles since 2011. On 6 April 2026 it went to 55p, and the rate above 10,000 miles stayed at 25p. The increase applied to approved mileage allowance payments for employees and directors and to the simplified expenses rate for the self-employed, so the two are now the same number.

They are still different regimes, and it is worth keeping them straight. A director or employee is reimbursed by the company, free of Income Tax and National Insurance. A self-employed person deducts the mileage from their own profit. Same rate, different mechanism. A return you are filing now for an earlier year still uses 45p.

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.