April 9, 2024

Tax Planning: Company Cars


Cars and other benefits may form part of a spouse or civil partner’s overall remuneration package.

Even where the spouse does not work in the business, it may be tax-efficient to provide a company car.

The owner / director will pay tax on the car(s) as they are part of their remuneration package ― hence they appear on the owner / director’s P11D and not their spouse’s.

Where the cars driven have very low CO2 emissions, 𝘁𝗵𝗲 𝗮𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲𝘀 𝗰𝗮𝗻 𝗯𝗲 𝘀𝗶𝗴𝗻𝗶𝗳𝗶𝗰𝗮𝗻𝘁. Depending on the car’s CO2 emissions, the company may get up to 100% FYA on the purchase, tax relief on all running costs and also be able to claim all the VAT back on the car’s running costs. Overall, this should be cheaper than providing a car for a spouse out of taxed income.

If the company decided to lease the vehicle rather than buy it, the company would recover 50% of the VAT on the car lease and then receive a corporation tax deduction for the full rental cost (including the 50% irrecoverable VAT).

This is a broad outline and comparative calculations need to be looked at – something we do for our clients.

When it comes to electric cars, the tax savings can surely be worthwhile!

Back to blog