Leasing a car through your company can be a great way to finance a vehicle while benefiting from potential tax savings. However, the rules differ depending on whether you are a limited company or a sole trader, and how the vehicle will be used.

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✅ Leasing a Car Through a Limited Company

Yes, a limited company can lease a car in its name.

Business vs Personal Use

• 100% business use – lease payments and running costs are fully deductible.
• Mixed business & personal use – allowed, but a Benefit-in-Kind (BIK) tax applies.

Tax Advantages

• Corporation Tax Relief – Lease payments are an allowable business expense, reducing taxable profits.
• VAT Reclaim:
  • 50% reclaim on lease payments if there’s personal use.
  • 100% reclaim if the car is strictly for business (HMRC will require evidence).

Benefit-in-Kind (BIK)

If the car is available for personal use, employees or directors will pay BIK tax, which is calculated based on:

• The car’s P11D value (list price)
• CO₂ emissions
• Your income tax band

Tip: Electric and hybrid vehicles are far more tax-efficient, with BIK rates as low as 2%.

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✅ Leasing a Car as a Sole Trader or Partnership

If you’re self-employed, the lease will be in your name, not the company’s.

• You can only claim the business-use percentage of lease payments and running costs.
• If you are VAT registered, you can reclaim VAT proportionate to business use.

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🚗 Types of Car Leases for Businesses

• Contract Hire (CH) – Most common; fixed monthly payments and return the car at the end.
• Finance Lease / PCP – May include a balloon payment or the option to purchase the vehicle.

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⚠️ Things to Consider

• Personal use triggers BIK tax.
• Mileage limits may apply.
• Early termination can be costly.

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✅ Should You Lease Through Your Company?

Leasing a car through your business can be tax-efficient, especially for low-emission or electric vehicles. However, if you plan significant personal use, the BIK tax may outweigh the benefits. Always check with your accountant before signing a lease.

Looking to Lease a Car?

Contact Ready2Lease on 0116 403 0235 – www.ready2lease.co.uk
Business & Personal Vehicle Leasing — Flexible, competitive, and committed to service