Mileage Claims and Company Cars for Limited Company Directors

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Last updated 23 October 2026. Written by the Limited Company Accountant UK team, part of Accotax. Figures are for the 2026/27 tax year; always check GOV.UK for the latest rates.

Short answer: Directors who use their own car for business can be paid 55p per mile for the first 10,000 miles and 25p after that, tax-free. A company car is a benefit in kind taxed on its list price and CO2 emissions, and is usually most efficient for fully electric cars, where the benefit-in-kind rate is low.

Key facts

Mileage rate (cars)	55p first 10,000 miles, 25p after
Company car tax	Benefit in kind plus Class 1A NI
Electric car BiK	Low rate, rising in steps
Van benefit	Fixed charge for private use
Fuel for company cars	Fuel benefit charge if private fuel paid

Three ways to cover business travel

A director who drives for work has three main options. The first is to use a personal car and claim mileage from the company. The second is for the company to buy or lease a car and provide it as a company car. The third is to buy a van, which is taxed differently from a car.

Which is best depends on how much business mileage you do, what type of vehicle you want, and how much private use there will be. The tax rules differ for each, so it pays to compare before committing to a purchase or lease.

Option one: claim mileage for your own car

HMRC’s approved mileage allowance payments let the company pay 55p per mile for the first 10,000 business miles in a tax year and 25p per mile after that. If the company pays up to those rates, there is no tax or National Insurance for you, and the company deducts the payment as an expense.

This is the simplest option for directors who do modest business mileage and want to avoid the benefit-in-kind regime. You keep the car in your own name, and you do not need to worry about the capital costs through the company. You will need a mileage log with date, start and end point, purpose and miles.

Option two: a company car

If the company provides a car that you can also use privately, you are taxed on a benefit in kind. The taxable amount is the car’s list price multiplied by a percentage based on CO2 emissions. The company also pays Class 1A National Insurance at 15% on the benefit value. If the company pays for private fuel, a fuel benefit charge applies, which is usually uneconomical.

For high-emission petrol or diesel cars, the benefit can be large, and the director often ends up paying more tax than the cost of owning the car personally. That is why fully electric company cars have become the main exception.

Electric cars as a special case

Fully electric cars carry a very low benefit-in-kind rate, which has been designed to rise gradually in steps in future years. A director who selects an electric company car pays a small amount of tax on the benefit, while the company can claim capital allowances on the purchase, or deduct the lease rental.

In effect, a company-owned electric car can be a very tax-efficient way of getting a vehicle, especially if you were going to buy one anyway. Check the current rates on GOV.UK, as the percentages change. Charging at home or at work has its own rules, and a company can provide workplace charging without a benefit in kind, which is not true for home charging.

Vans and pool vehicles

A van can sometimes be a more tax-efficient option than a car. If you have a van and use it privately, you pay a fixed van benefit charge, plus a fuel charge if the company pays for private fuel. If private use is only commuting between home and work, the van is treated as not having private use.

A genuine pool car, used by several employees and not kept at anyone’s home, has no benefit in kind. However, for a sole director company it is difficult to meet the conditions, so it is rarely worth trying.

What the numbers look like

Suppose you drive 8,000 business miles a year. Claiming mileage from the company gives you £4,400 tax-free, and the company deducts £4,400 from profit, saving about £836 in Corporation Tax at 19%. That is simple and clean.

If you instead take a petrol company car with a high benefit-in-kind percentage, the taxable benefit could be several thousand pounds each year, plus Class 1A NI paid by the company. For a higher rate taxpayer, the personal tax on the benefit alone can exceed £3,000. A fully electric company car often swings the comparison the other way.

Business versus private journeys

Only business mileage counts. A trip to a client’s site, a supplier, a business meeting or a temporary workplace is business travel. Travel between your home and a permanent place of work is commuting, which is a private journey even if you do business calls in the car.

If you work from home and your home is your main place of work, trips from home to clients are usually business travel. Keep a simple log, which can be a note in a spreadsheet or an app, with each trip’s date, destination, reason and miles. Without a log, a mileage claim is difficult to defend.

Leasing and personal contract hire

Some directors lease a car through the company. The rentals are deductible, but for cars with CO2 emissions above 50g/km, 15% of the lease payments is disallowed. A zero-emission car avoids that restriction. A company car lease also creates a benefit in kind for you, so the net benefit depends on the car’s price and emissions.

A personal lease with mileage claims is sometimes cheaper than a company lease for a director who does little business mileage. Run the numbers for both before signing, because a lease commits you for two to four years.

Choosing the right option for your situation

A quick rule of thumb helps. If you drive less than about 10,000 business miles a year in a petrol or diesel car you already own, claim mileage. If you are choosing a new vehicle and an electric one suits your driving, a company electric car is usually worth modelling. If you need a van to carry tools or stock, check the van benefit rules. And if you are unsure, ask your accountant to compare the three on your actual mileage, the vehicle price and your tax band, because the difference can be a few thousand pounds a year.

Frequently asked questions

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