Buying a Vehicle Through a UK Business: 2025/26 Tax Rules Explained

JSC Accounting Team
Apr 22
2 min read

Investing correctly in your business is key to growth

Purchasing a vehicle through your business can be a smart financial move, but it’s important to understand the tax implications and allowances available in the 2025/26 tax year. Whether you're considering a company car, a van, or an electric vehicle, different tax treatments apply depending on the type of vehicle and how it’s used.

1. Business vs. Personal Use: Key Considerations

Before purchasing a vehicle through your business, consider:

Business Use: If the vehicle is used exclusively for business purposes, it may qualify for tax relief.
Personal Use: If the vehicle is available for personal use, it will be subject to Benefit-in-Kind (BIK) tax, which varies based on CO2 emissions.

2. Tax Treatment for Different Vehicles

Company Cars

Capital Allowances: Businesses can claim tax relief on company cars, but the amount depends on CO2 emissions:
- Electric cars (0g/km CO2): Qualify for 100% first-year allowances, meaning businesses can deduct the full cost from taxable profits.
- Low-emission cars (≤50g/km CO2): Eligible for 18% writing down allowance per year.
- Higher-emission cars (>50g/km CO2): Only 6% writing down allowance per year.
BIK Tax: Employees using company cars for personal use must pay Benefit-in-Kind tax, which is calculated based on CO2 emissions and the car’s list price.

Vans & Commercial Vehicles

Annual Investment Allowance (AIA): Businesses can deduct 100% of the cost of vans and commercial vehicles in the year of purchase.
VAT Reclaim: If the van is used solely for business, VAT can be reclaimed.

Electric Vehicles & Tax Benefits

First-Year Allowances: Fully electric cars qualify for 100% first-year capital allowances.
Lower BIK Rates: Electric vehicles have significantly lower Benefit-in-Kind tax rates, making them a tax-efficient choice.

3. Changes to Double-Cab Pickups (2025 Rule Update)

From April 2025, HMRC will treat double-cab pickup trucks as cars rather than commercial vehicles for tax purposes. This means:

Higher BIK tax for employees using them personally.
Reduced tax efficiency for businesses purchasing them.
No full VAT reclaims on purchase.

Businesses considering a double-cab pickup should purchase before April 2025 to benefit from the current tax treatment.

4. Leasing vs. Buying: Which Is Better?

Buying: Allows businesses to claim capital allowances and potentially reclaim VAT.
Leasing: Monthly payments are tax-deductible, but businesses cannot claim capital allowances.

5. Final Thoughts

Purchasing a vehicle through your business can offer tax advantages, but it’s essential to choose the right type of vehicle and understand the latest tax rules. Electric vehicles remain the most tax-efficient option, while changes to double-cab pickups may impact business decisions.

If you think we can help your business, get in touch or call us at 0115 646 2003.