Buying a used car through the company
Company car tax is worked out on the car's price when new, not what you pay for it used. See whether the company buying it, or you buying it with dividends and claiming mileage, costs less overall.
Your answer
Enter the car's prices, your miles and running costs, and your salary to compare the two ways.
About this calculator
For owner-directors of a limited company deciding whether the company should buy a used car for them, or they should buy it themselves.
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How it’s worked out
If the company buys it, it gets tax relief on the price through writing-down allowances: 14% a year of what's left for an electric car or one at or below 50g/km, 6% a year above that. A used car never gets the 100% first-year allowance, even if it's electric. You pay income tax on a share of the car's list price when new, and the company pays 15% National Insurance (Class 1A) on the same amount.
If you buy it, you pay for it with dividends from the company, and pay dividend tax on them. The company can pay you 55p a mile tax-free for the first 10,000 business miles a year (25p after), and it gets Corporation Tax relief on that.
Each total is the money that leaves you and your company together: the car less what it sells for, the running costs and all the tax, less any tax relief. Anything you pay yourself is counted as coming from dividends, so both ways are measured the same way. Mileage money above your running costs counts as dividends you no longer need to take. We use whole tax years from 2026/27 at today's tax bands, and don't count interest, VAT or fuel for personal trips.
Worked example
Buying the car yourself costs about £17,204 less over 3 years than the company buying it.
2026/27 to 2028/29 · petrol · company profits up to £50,000 (19%) · salary £12,570 · dividends £37,700 a year
| A. The company buys it | |
|---|---|
| Price the company pays | £20,000 |
| Running costs, £2,500 a year for 3 years | + £7,500 |
| 2026/27: 32% of the £35,000 list price = £11,200 taxed as your pay. Your extra income tax | + £5,040 |
| 2027/28: 32% of the £35,000 list price = £11,200 taxed as your pay. Your extra income tax | + £5,040 |
| 2028/29: 33% of the £35,000 list price = £11,550 taxed as your pay. Your extra income tax | + £5,198 |
| Dividend tax on the extra dividends you take to pay that tax | + £8,501 |
| Company's National Insurance on the car benefit (Class 1A, 15%) | + £5,093 |
| Corporation Tax saved by writing-down allowances: 6% a year (special rate pool) comes to £3,388, at 19% | − £644 |
| Corporation Tax saved on the running costs and Class 1A, at 19% | − £2,393 |
| Cost if the company buys it | £53,334 |
| B. You buy it | |
| Price you pay | £20,000 |
| Running costs, £2,500 a year for 3 years | + £7,500 |
| Dividend tax on the dividends you take to pay for the car | + £10,683 |
| Dividend tax saved: the mileage money left after running costs means you take less in dividends | − £172 |
| Corporation Tax saved on the mileage money the company pays you (£3,300 a year, tax-free to you), at 19% | − £1,881 |
| Cost if you buy it | £36,130 |
Worked out using HMRC's published rates for the 2026/27 tax year (6 April 2026 to 5 April 2027), on a yearly basis.
Questions people ask
Why is the company car tax so high on a cheap used car?
Because it's worked out on the car's list price when it was new, with its options, not on what the company pays for it. An older car bought cheaply can still carry the tax of an expensive new one.
Does a used electric car get the 100% first-year allowance?
No. That's only for new and unused electric cars. A used electric car goes in the main pool and gets 14% a year of what's left.
What happens when the car is sold?
If the company sells it, the sale price comes off the pool of tax value. If it sells for more than its tax value, some of the relief is taken back. If it sells for less, the rest of the relief keeps coming, slowly, in later years. We count the first but not the second. If you sell your own car, there's no tax on it.
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