Is It Better To Buy A Car Through My Company or Personally?
- Jerelyn Aglibao
- Nov 7
- 5 min read
Updated: 14 minutes ago
Deciding whether to purchase a car via your company or personally is a common question for small business owners, directors and self-employed professionals. The right answer depends on your business structure, how much you use the vehicle for business vs private travel, the car’s CO₂ emissions, and the tax & compliance implications.
In this article, we’ll walk through the key issues so you can assess what works for you.
Buying a car through the company – the key advantages and trade-offs
Advantages
Deducting costs and capital allowances. If your company buys a car and uses it in the business, you can claim capital allowances on that car.
Running cost relief. The company can pay for business-running costs (insurance, servicing, fuel for business journeys), and these are deductible business expenses (assuming use is properly apportioned).
Professional image/branding. For some businesses, having a company-branded car can enhance image, client perception and credibility. While not primarily a tax reason, it can support the business case.
Trade-offs/disadvantages
Benefit-in-Kind (BIK) tax for private use. If a car owned by the company is made available for private use (including commuting in many cases), then a taxable benefit arises. HMRC says: “You pay tax on the value to you of the company car … depends on how much it would cost to buy and the type of fuel it uses.” You must report it (via P11D or payroll) and pay tax and possibly the employer’s Class 1A National Insurance.
Lower relief for high-emission cars. Cars with higher CO₂ emissions attract lower writing-down allowances (6%) rather than the main rate (18%). That reduces tax relief. In addition, BIK rates will be higher for petrol/diesel higher-emission cars vs electric or ultra-low emission vehicles.
Private use vs business use must be tracked. You’ll need to keep good records of business vs private miles, ensure the company records usage and apply apportionment where needed. The risk of getting this wrong means extra tax or penalties.
VAT reclaim limitations. If the vehicle is used for any private use, then VAT recovery may be restricted. For example HMRC VAT manual says: you cannot reclaim full input tax if the car is used for private journeys.
Buying the car personally – pros and cons
Advantages
Simplicity and flexibility. You buy the car in your personal name, run it as a personal asset, and you don’t have company compliance issues (BIK, P11D, employer NI). If you use it for business trips occasionally, you can claim mileage relief: for example, for self-employed, you can claim simplified expenses or capital allowances (if not using simplified) for business use. And if you’re an employee using your own car, you may claim flat mileage rates (45p for the first 10,000 business miles, 25p thereafter) as tax relief when the employer doesn’t pay an allowance.
Avoiding BIK tax. Since the company does not own the car, there’s no benefit-in-kind charge for the director/employee on private use.
Personal ownership – potential capital appreciation or resale control. As a personally-owned vehicle, you hold the asset and the disposal proceeds belong to you (though realistically, cars depreciate). You don’t get trapped in company asset rules.
Disadvantages
Less tax relief for purchase cost. If owned personally, you cannot claim capital allowances as a company would. For a company purchase, you had the business tax relief advantage. You do, however, claim a mileage rate for business use—but you cannot claim running costs or depreciation via the company. For self-employed, you may claim certain costs under traditional accounting if the business use, but travel from home to work is excluded.
Running cost burden falls on you. The personal cost of insurance, tax, servicing, and fuel (for business and private use) is yours, though you may get mileage reimbursement for business journeys.
Less differentiation between business use and private use. If you use the car for both business and private use heavily, the personal-ownership route may not optimise tax relief compared with a properly registered company-car arrangement.
Which is better? Some illustrative scenarios
Below are some typical scenarios to illustrate how to weigh up the decision. Note: these are illustrative only — you will still need to run the numbers with your own car cost, mileage and use.
Scenario | What you do | Likely best route |
Director of Ltd. Co doing lots of business travel (say 20,000 miles/year), car is used 70 % business and 30 % private, choosing a new electric car (0 g/km) | Buy through the company, reclaim allowances, reduce corporation tax, BIK cheap (electric) | Company-purchase likely best |
Owner-manager does occasional client visits (say 3,000 business miles/year) and uses the car mostly privately | Buy personally and claim mileage reimbursement for business trips (45p/25p) | Personal ownership is likely simpler & cheaper |
The company wants a prestige petrol car (high list price, higher emissions) that will be used privately a lot | A company purchase may generate a high BIK for the director, a heavy cost; a personal purchase may be better | Personal ownership may well be better unless usage is business only |
Self-employed sole trader uses car 100% for business (no significant private use) and wants to maximise relief | Company purchase isn’t relevant (they are not a company), but personal purchase & claim capital allowances via business purchase is possible. For a limited company scenario, a company purchase may make sense | If you run a limited company, a company purchase may be best |
Key questions you must ask before deciding
What percentage of the car’s mileage will be business vs private?
What are the CO₂ emissions (g/km) of the car? If very low (or zero), this pushes the company-purchase decision more favourably (via first-year allowances, lower BIK).
What is the list price (or cost) of the car? The higher the cost, the more BIK impact if private use arises.
How important is having the car treated as a company asset or the company’s brand image?
What is your company’s corporation tax rate, and your personal tax rate (for the director/employee)?
Do you have the record-keeping in place to track business vs private usage, mileage logs, etc?
Are there VAT implications if you plan to reclaim VAT and use the car for private as well as business?
Practical steps if you decide company purchase
Register the car in the company’s name.
Keep detailed records: mileage log distinguishing business vs private, purpose, start and end postcodes (for claiming relief).
If private use arises, calculate the taxable benefit and report to HMRC (use the official calculator).
Pay Class 1A National Insurance on the benefit.
Claim capital allowances appropriately (check whether the main or special rate applies).
Review whether VAT recovery is possible (if use is wholly business, then maybe; if any private use then restrictions apply).
Conclusion
There’s no one-size-fits-all answer to “is it better to buy a car through my company or personally?” in the UK. The right decision often depends on the mix of business vs personal usage, the emissions profile of the vehicle, cost, and your tax position.
Buy through the company if you have high business mileage, want to offset cost via tax relief, the car is low-emission (making BIK tax lower), and you can manage the compliance.
Buy personally if the car is used mainly privately, or you prefer simplicity, want to avoid BIK tax and company compliance, and business travel is modest.
As always, you should model the numbers for your specific case (taking into account corporation tax, personal tax, BIK, depreciation, running costs) and potentially consult your accountant to ensure your decision is tax-efficient and compliant with HMRC rules.
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