Do You Need a Company Car as a Small Business?

If you’re running a small business, you’ve probably wondered whether getting a car through the business is worth it. It’s not just something for big firms, plenty of sole traders and small company directors look into it too. Sometimes it works out cheaper or more practical but other times it’s just another thing to keep track of. It all depends how you run things day to day.

What Counts as a Business Vehicle?

This could be anything from a van used for jobs or deliveries, to a small car for driving to meetings or picking up supplies. It doesn’t have to be a work only vehicle, but how much of your driving is for business does make a difference.

The rules aren’t the same for everyone.

If you’re self employed you’ll have one set of options- if you’re running a limited company, you’ll have others. On top of that, it matters whether the car is leased, bought through the business, or used personally with mileage claimed back.

Each one comes with its own setup, and not all of them are worth the hassle depending on what you actually need.

What Are the Tax Benefits?

Sole traders who use their own car for work can claim mileage. At the time of writing, HMRC allows 45p per mile for the first 10,000 miles and 25p after that. It covers running costs like fuel, servicing, insurance and general wear, so you don’t need to hang onto receipts every time you fill up. For a lot of people, that’s the easiest way.

If the vehicle is owned by the business instead, you can claim individual running costs. You’ll need to keep proper records and work out what percentage of your driving is actually work related. It’s more admin, but it can work out better if you drive a lot for your job. In a limited company, it’s slightly more involved.

If the company owns the vehicle and you use it outside of work as well, it counts as a benefit in kind. That means you’ll be taxed on it personally.

he amount depends on things like the car’s emissions and list price. Electric cars tend to come out better here, because the tax on them is a lot lower than petrol or diesel models.

Is It Worth It?

If most of your driving is just the odd client visit or picking something up locally, it’s usually easier to claim mileage and stick with a personal car. But if you’re regularly on the road, carrying stock, or working across several locations, it might be worth having a vehicle through the business.

Electric cars are becoming more common for this now. They’re cheaper to run, the tax is lower and there are some decent lease deals around too. If you’re already thinking about changing vehicles, it’s something to look at properly rather than just assuming it’s for bigger companies.

This is a contributed post.