Company Vehicles

An employer can provide a vehicle to an employee to use personally – this provision is treated as a benefit in kind, part of the employees remuneration package, and taxable on that individual.

Such a vehicle may be provided with or without fuel. If fuel is also provided for the employees personal use, then that will be a separate benefit in kind.

The employee will pay tax on these benefits in kind, monthly via the payroll; but there is no employees national insurance due, so such benefits can be a good way of rewarding employees’ tax efficiently, if the value of that benefit is reasonable.

The employer pays all the costs of this vehicle – from purchase to cleaning, including safety equipment e.g. dash cam, bike helmet.  Also, any financing cost of the vehicle e.g. loan interest or lease payments. The employer is also liable to 15% employers’ national insurance on the benefits in kind.  All these costs are tax deductible against the business profits.

Depending on what the vehicle is classed as, the benefit in kind value for tax may vary widely, and could bear little relation to the cost of making that vehicle available.  Hence some vehicles may be very tax efficient especially if you own the company, and some not efficient. So, make sure you check out your specific vehicle choice before making the commitment.

The value of these benefits in kind

Lorry – zero

Electric Van – zero

Other Vans – if actually used personally then the benefit in kind is £4,170 per vehicle for 2026/7 (zero if not actually used personally) – this can be split between the number of employees with private use of that vehicle. Home to work travel in a Van is classed as business travel so employees can take the vehicle home with no benefit in kind arising.

Cars – Each year HMRC specify variable percentage rates based on fuel type and Co2 that are then applied to the list price of the vehicle to arrive at the benefit in kind value for the car.  Note this benefit is regardless of cost or age of the vehicle and regardless of actual use i.e. there is a benefit in kind if the vehicle is available for private use or taken home for even just one night.

• Electric cars – currently 4% of list price, rising to 9% by 2032.
• Hybrid cars (under 50 CO2) – currently 4%-15% of list price depending on electric range– but rising to 18% regardless of range in 2028.
• Other cars – 15%-37% of list price depending on CO2.
• Classic cars – cars that are over 15 years old may be classed as Classic cars if they have a market value in excess of list price and of over £15,000 – the benefit in kind is then based on market value instead of list price.
• For vehicles with no CO2 rate published, there are rates based on cc.

Van fuel – £798 is the benefit in kind value associated with providing fuel for private use of a company van in 2026/7 (equivalent to fuel for about 4,500 private miles regardless of actual private mileage or fuel costs)

Car fuel – nil for electricity but the car benefit percentage is applied to £29,200 if any other fuel is provided for private use of a company car, even if just one tank in the year – equivalent to tax on fuel for maybe 2,300 miles for a hybrid but to up to maybe 50,000 personal miles for a diesel vehicle!

HMRC give us advisory fuel rates quarterly, that may be used to claim fuel for business mileage or reimburse fuel for private use milage in a company vehicle, to avoid a fuel benefit in kind applying, but private use payments must be paid by 7^th July.

Bicycles – zero if mainly used for business journeys e.g. commuting.

Other vehicles – e.g. motor bikes, boats, helicopters, etc – private use apportionment of actual running costs including Vat and 20% of purchase cost pa.

Provision of a home charging point for your electric company vehicle – zero.

It is a Car or a Van?

A car is a mechanically propelled road vehicle, except

• A goods vehicle e.g. Lorry or van
• A motorcycle
• An invalid carriage
• A vehicle not commonly used as a private vehicle or unsuitable for such e.g. Grand Prix racing car.

A van is a mechanically propelled road vehicle primarily designed to carry goods i.e. no back windows, with a design load weight of less than 3,500kg.

Company Tax Deductions

A goods vehicle, bike or new electric car currently qualifies for immediate full tax relief, by deduction from company profits in the year of purchase. This enhances the benefit of putting these vehicles through your business.

However other cars do not get full immediate tax deduction for the purchase price – in fact, they only get a tax deduction in small increments over the remaining life of the company – 14% if CO2 is less than 50g/km, 6% if above.  Hence high value non-electric cars may take years to get full tax relief – unless you plan to close your company soon.

Remember if the vehicle is a company vehicle, then when sold, or subject to an insurance claim, then the proceeds are company income, subject to tax.

The effect is that you get full tax relief for the reduction in value of the vehicle while in the company, but that tax deduction is immediate for some cars and for others can continue well after their sale.