If you're a small business owner in Crawley or the wider West Sussex area, you might be wondering whether it’s worth buying a vehicle through your business. 

It can be a smart move. With the right planning, you might save on tax, claim back VAT, and even make your cash flow work harder. But there are also a few pitfalls to avoid, and the type of vehicle you choose can make a big difference.

In this blog, we’ll walk you through:

• The pros and cons of buying a vehicle through your business
  
• How the different vehicle types (petrol, diesel, electric, hybrid) are taxed
  
• What “benefit-in-kind” tax is (and how to reduce it)
  
• The differences between buying and leasing
  
• VAT implications
  
• Key things to ask your accountant before you make the leap
  

Let’s dive in!

Should You Buy a Vehicle Through Your Business?

Buying a car, van, or other vehicle through your limited company or sole trader business can come with a number of perks, but it depends heavily on how the vehicle is used and what type it is.

The Advantages:

• Tax relief on the purchase cost (via capital allowances)
  
• Claiming back VAT (in some cases)
  
• Business mileage covered as a legitimate expense
  
• Reduced personal cost if you use the vehicle for both work and personal travel
  

The Drawbacks:

• Benefit-in-kind (BiK) tax can apply if you use the vehicle personally
  
• Not all the VAT is always reclaimable
  
• You’ll need to keep solid mileage and usage records
  
• Cash flow considerations – buying outright is a big upfront cost
  

The big question is: Is the vehicle mainly for business use? If you’re popping to clients, delivering goods, or using it daily for work purposes, then it could make sense. But if it’s only occasionally used for work, buying it privately and claiming mileage might be more tax-efficient.

Understanding Benefit-in-Kind (BiK) Tax

This is one of the most important concepts to understand. If your company buys a vehicle and you or an employee use it for personal journeys, HMRC treats that as a perk – and it’s taxable.

The amount of tax you’ll pay is based on:

• The list price of the vehicle
  
• The type of fuel it uses
  
• Its CO2 emissions
  

The Lower the Emissions, the Lower the Tax

• Electric vehicles: Very low BiK rates (currently 2% in 2025/26)
  
• Plug-in hybrids: Low, but higher than fully electric
  
• Petrol and diesel: Generally much higher, especially older models
  

Here’s a simple example:

• A petrol car emitting 130g/km CO2 may have a BiK rate of 30%
  
• An electric car with 0g/km CO2 has a BiK rate of 2%
  

So, if the petrol car’s list price is £30,000, the taxable benefit is £9,000 and you’ll pay income tax on that figure depending on your tax band. The company will also pay Class 1A National Insurance on it.

This is why electric vehicles (EVs) have become so popular among business owners.

What About Vans?

Vans are treated slightly differently. If they’re only used for work and commuting, there’s no BiK charge at all. If there's personal use, a flat-rate tax charge applies, which is usually lower than the BiK on cars.

If you're a tradesperson in West Sussex or using a van for delivery or equipment transport, this can be a really tax-efficient way to go.

Buy or Lease: What’s Better for Business?

There’s no one-size-fits-all answer, but here's how the two compare:

Buying

• You’ll either pay upfront or take out a loan/finance agreement
  
• You can claim capital allowances (we’ll explain more below)
  
• Once it’s paid off, the vehicle belongs to the business
  

Leasing

• Fixed monthly cost, often includes maintenance
  
• You can’t claim capital allowances – but lease payments can be deductible
  
• No big upfront cost, good for cash flow
  

Leasing is growing in popularity because of its flexibility, particularly for newer businesses in Crawley that want to keep overheads predictable.

Capital Allowances Explained (Without the Jargon)

When you buy a vehicle through your business, you can claim tax relief on the cost through something called capital allowances. This reduces your taxable profit – and therefore your tax bill.

Here’s how it works:

First-Year Allowances (FYA)

If you buy a new electric or zero-emissions vehicle, you might be able to claim 100% of the cost in the first year. So if you buy a £35,000 electric car, that full amount could reduce your taxable profits for the year.

Writing Down Allowances (WDA)

For other vehicles, like petrol or diesel cars:

• 18% for low CO2 cars (under 50g/km)
  
• 6% for higher CO2 cars (above 50g/km)
  

That means the deduction is spread out over several years. So a £30,000 car at 6% WDA would give you a £1,800 deduction in year one, and so on.

Can You Claim VAT Back on a Business Vehicle?

This one’s a bit tricky.

You can reclaim VAT if:

• The vehicle is used exclusively for business
  
• There’s no personal use at all (HMRC is strict on this)
  

That means you’d need to keep it locked at work overnight or have another personal vehicle available. If there’s any personal use, you generally can’t claim the VAT back on the purchase of a car.

Vans are easier:

• VAT is usually reclaimable, even if there’s minor personal use
  

Leased vehicles are different again. You can typically claim 50% of the VAT on lease payments if there’s personal use.

Is It Worth Going Electric?

From a tax perspective, absolutely. EVs are currently the most tax-efficient option if you’re using a car through your business.

• 2% BiK rate until at least April 2026
  
• 100% first-year allowance
  
• Cheaper running costs (no road tax, lower fuel cost)
  

Add to that the growing ULEZ and clean air zone rules across the South East, and an EV makes more sense than ever. Especially if you're working in or around Crawley, Brighton, or central London.

You can also get grants for installing a charger at your business or home, which is worth exploring.

Real-World Example: Crawley Business Owner

Let’s say Emma runs a mobile beauty business and is considering buying a car through her limited company.

She does 80% business miles – visiting clients across West Sussex, attending networking events, and buying supplies. She's torn between a £25,000 petrol car and a £30,000 electric car.

Petrol Car

• BiK rate: 30% → £7,500 taxable benefit
  
• Her personal tax: Around £1,500/year
  
• WDA: 6% = £1,500 deduction first year
  

Electric Car

• BiK rate: 2% → £600 taxable benefit
  
• Her personal tax: Around £120/year
  
• FYA: Full £30,000 deducted in year one
  

Despite the higher upfront cost, the EV saves Emma money on tax, gives her a huge first-year deduction, and has lower ongoing running costs.

Key Questions to Ask Your Accountant

Before you commit to a vehicle purchase through your business, here are some things to check with your accountant:

1. Is it more tax-efficient to buy through the company or privately?
   
2. Will I pay benefit-in-kind tax? How much?
   
3. Can I reclaim any VAT?
   
4. Should I buy outright or lease?
   
5. How will this impact my Corporation Tax?
   
6. What mileage records do I need to keep?
   

At Curve Accountancy, we help local business owners across Crawley, Horsham, East Grinstead, and the wider West Sussex area make these decisions with clarity and confidence. Every business is different so the right vehicle strategy for one may not be the best for another.

Final Thoughts

Buying a vehicle through your business can be a brilliant tax-saving strategy if you plan it properly. From choosing the right type of vehicle, understanding benefit-in-kind tax, making the most of capital allowances, and navigating VAT rules, there’s a lot to consider.

Electric vehicles are especially worth looking at, and the incentives are better than ever. But just because something looks good on paper doesn’t mean it’s the best fit for your business. 

That’s where having a proactive accountant makes all the difference.

Need advice? Let’s chat.

If you’re thinking about buying a car or van through your business and want tailored tax advice, get in touch with the team at Curve Accountancy. We’re here to help you make smart, informed decisions that support your business goals and save you money in the long run.