Can You Write Off a Car as a Business Expense in the UK?

Whether you can deduct the cost of a vehicle depends on a number of factors, including your business structure, how the car is used, and the method you use to calculate your vehicle expenses. 

A car that is specifically used for business is treated differently from the one that is being used for school runs on weekdays and client visits in between. Therefore, there is one distinction that sits beneath almost every rule: business vs private use. Getting this distinction correct, right from the beginning  shapes which of the options discussed in this blog apply to you. 

Can You Write Off the Cost of Buying a Car?

Buying a car for your business is treated differently from purchasing items such as laptops or tools. As a normal business expense, you can not generally deduct the full cost of the car as a normal expense. Instead, the tax relief is spread over time on the basis of a car’s CO2 emissions. 

The amount you can claim is on the basis of  the car’s CO2 emission:

• 0g/km: if the car is new and unused, 100% of the cost can be claimed in the first year.
• Low emissions: for low emission cars, 14% of the remaining cost can be claimed each year (this rate applies from April 2026).  
• Higher emissions: 6% of the remaining cost can be claimed each year.

These rules can change on your choice of car and when you purchase it. Therefore, check the vehicle’s CO2 emissions and the latest HMRC rates before you finalize a decision. 

What Car Expenses Can You Claim?

If you’re self-employed, HMRC allows you to claim a range of business-related vehicle costs, including: 

• Vehicle insurance 
• Repairs and servicing 
• Fuel 
• Parking 
• Vehicle hire charges 
• Vehicle tax license fees 
• Breakdown cover 

As with most business expenses, the rule is that the cost must only relate to business use, where the vehicle is also used privately . 

There are two categories which are specifically excluded regardless of how the vehicle is otherwise used:

• Fines and penalty charges are not allowable, even if incurred while driving for work.
• Commuting between home and your regular work place can not be counted as a business journey, so these costs can not be claimed either. Even if the underlying trip was for a business, a parking fine picked up on a client visit is not deductible. 

Business and Personal Use of the Same Car

If you use the same car for both business and personal reasons, you can generally only claim the part that relates to your business use. Keeping a clear record of your mileage and business journeys will help you work out the correct split and support your claim if HMRC asks questions. 

As a simple example: if a car is used 60% for business and 40% privately, you can only claim the 60% of the relevant running costs.  The exact calculation depends on whether you are claiming your actual vehicle costs or using Capital Allowances, which we cover in the next section. 

Mileage vs Actual Car Expenses

If you are a sole trader or a part of a  partnership with no company partners, you can choose between two ways of claiming tax relief for your business vehicle.  You can either claim the actual cost of running  a car or use HMRC’s  simplified mileage method, which uses a fixed amount for each business mile. 

The current approved mileage rate is:

• 55p per mile for the first 10,000 business miles 
• 25p per mile after the first 10,000 miles . 

This flat rate is meant to cover fuel, servicing, insurance, and general wear in one figure. An important thing to remember is that you cannot switch between the two methods for the same vehicle once you have claimed using one method.

HMRC does not allow a business to mix and match. If you have already claimed Actual Vehicle Costs or Capital Allowances, you can not later use  simplified mileage expenses for that same vehicle. The choice needs to be made from the beginning, since it applies for as long as the business uses that specific car. 

Can a Limited Company Buy a Car for Business Use?

A limited company can purchase a car and claim Capital Allowances in the same way described above, on the basis of the vehicle’s CO2 emissions and whether it is new and unused with zero emissions. It gets more layered once an employee or a director also has private use of that car. 

When a company car is made available for personal use, this is treated as a Benefit in Kind which is a taxable benefit calculated using the car’s list price and a percentage based on its CO2 emissions.

The percentage is lower for zero-emission and low-emission cars as compared to higher-emission petrol or diesel equivalents, it is reviewed and can change from one tax year to the next, so it is important to check the current rate directly from GOV.UK when calculating the actual figures for a specific car. 

Two separate tax positions needs to be considered together: 

• What the company can claim on a purchase 
• What the benefit in kind costs the director or employee personally

Are Electric Cars More Tax-Efficient?

Electric cars qualify for 100% first-year allowance, as discussed earlier.  The full cost can be claimed against profits in the year of purchase, rather than spread out over several years at 14% and 6%. Used electric cars are treated differently. According to HMRC, these cars fall into the main rate pool instead of qualifying for the 100% first-year allowance, therefore relief is still available, it is just spread over time in the same way as other main-rate cars. 

Electric cars tend to sit in noticeably lower Benefit in Kind bands as compared to petrol or diesel cars of the same value, which is another point in their favor where private use by a director or employee is involved. But, an electric car is not automatically the most suitable choice for all businesses.

It is worth looking at the full picture rather than the headline allowance alone because purchase price, expected mileage, how the vehicle will be used, and the wider financial position of the business are some of the factors that need to be considered as they all affect whether the tax advantages translate into a genuinely better outcome. 

Choosing the Right Way to Claim Car Costs

For the above information, a few questions arise that tend to shape the right approach for a specific business: 

How much of the car’s use will genuinely be business mileage, and how much will be private?

This impacts both simplified mileage claims and any restriction on Capital Allowances or actual costs. Sole traders or partnerships qualify for both actual cost method, and simplified mileage. It is important to compare what each would produce before making the final decision as the best option varies depending on the car and how it is being used. 

As discussed earlier, the car’s purchase price and CO2 emissions are also important as they determine which Capital Allowance route applies and how fast relief is attained. For anyone purchasing via a limited company, wider implications like the Benefit in KInd position for the person with private use, are important to review before the purchase is made. 

Getting the Right Advice before you Buy

Cars can help generate legitimate business tax relief, but the rules are heavily dependent on how the vehicle is bought, how it is used, and which type of business structure is purchasing it. The routes discussed here are not automatically the wrong or right choice, they are dependent on the car and the type of business purchasing it. 

Since the correct answer depends on individual circumstances, it is worth considering the tax position before purchasing a car, instead of working it out after the purchase has been made. 

If you are considering buying a car for your business or are unsure which vehicle costs you can claim, Heighten Accountants can help you understand your options and choose a tax-efficient approach that fits your circumstances.