Business car leasing or business contract hire (BCH) offers enhanced tax savings, making it an attractive and cost-effective option for sole traders, partnerships, limited companies and VAT-registered companies. So, what are the key benefits of choosing a business lease rather than a personal lease or purchasing a car outright?
- Up to 100% of lease costs can be claimed back through Corporation Tax (100% for EVs and some PHEVs).
- Up to 100% of VAT paid can be claimed back.
- Low company car rates for EVs (3% in the 2025/26 tax year).
- Improved cash flow, and you can invest the capital required for a car elsewhere.
- Access to the latest vehicles and no need to worry about depreciation.
Keep reading for our in-depth guide on the advantages and disadvantages of leasing a car through your business, and the process you’ll need to follow.
Can I Lease a Car Through My Business?
Business leasing is only available to sole traders or those leasing through a partnership, limited company or VAT-registered company. There are also credit and affordability checks, similar to those for personal car leasing.
Should I Lease a Car Through My Business?
While business leasing offers many advantages, the most important consideration is whether it truly aligns with your business’s needs and financial goals. You should consider how often the vehicle will be used for business purposes and how the lease payments will affect your business’s cash flow.
Below, we look at the advantages and disadvantages of business car leasing, so you can make the right choice for your business.
Benefits of Leasing a Car Through Your Business
There are many advantages to choosing business leasing over a personal car lease or buying the vehicle outright.
Tax-Deductible Lease Payments
Lease payments are chargeable against Corporation Tax, allowing you to claim tax relief. This makes business contract hire a highly tax-efficient option. However, the amount you can claim back depends on the CO₂ emissions of your lease car:
- For cars with CO₂ emissions over 50g/km, only 85% of the lease cost is tax-deductible.
- If the CO₂ is 50g/km or less (all EVs and some PHEVs qualify), then 100% of lease costs are deductible.
Claim Back VAT
Leasing a car through your business means that you can claim up to 100% of the VAT back. If the car is used solely for business purposes, you can claim the full amount back. If the car is to be used for both business and personal purposes, you can claim 50% of the VAT back. However, if the car’s CO₂ emissions are higher than 50g/km, you can only claim back 85%.
Attractive Lease Offers
Leasing companies often offer better deals to business clients because businesses are seen as lower risk. If you need to lease more than one car, some companies might offer an attractive group discount that wouldn’t be available with a personal lease.
Cash Flow
A business lease is considered credit, while buying a vehicle requires capital investment. So, opting for a business lease rather than purchasing the car outright means more of your company’s cash is freed up for investment elsewhere.
Access to Newer Vehicles
Choosing a business lease means that when your lease period is up, you can simply hand back the keys and choose a new car for your next lease. This ensures you are always driving the latest vehicle with state-of-the-art technology and safety features, and helps maintain a professional business image.
No Depreciation Risks
Leasing a car through your business means you don’t have to worry about the typical risk of car ownership, such as depreciation.
Off-Balance Sheet Financing
Leasing a business vehicle is typically treated as an operational expense, rather than a liability. As the lease vehicle won’t appear as an asset on your balance sheet, this can make your company appear more attractive to investors or lenders.
Road Tax Included
At Morgan Highfield & Land, all our business leases include road tax in the monthly rental, as standard.
Disadvantages of Leasing a Car Through Your Business
Although there are many benefits of business contract hire, there are also some disadvantages that you’ll need to consider when making your decision.
Company Car Tax
Leasing a car through your business or as a sole trader means you’re required to pay Benefit-in-Kind (BiK) tax, which is sometimes referred to as company car tax, if you use the car for personal use. The amount of BiK tax you’ll have to pay will depend on the P11D value of the car, your income tax bracket and the BiK rate.
The BiK rate is based on a vehicle’s CO₂ emissions. For electric and hybrid vehicles that emit less than 50g/km, the BiK rate is only 3% (in 2025/26). However, the rate for petrol and diesel cars starts at 22% and the highest rate is 37%. To work out how much company car tax you would need to multiply the BiK value by your income tax bracket. Here’s a real-world example of a 20% taxpayer leasing a Porsche Macan Electric, which has a BiK rate of 3% (2025/26) and a P11D value of £68,500:
- £68,500 x 0.03 = £2,055
- £2,055 x 0.2 = £411 (yearly BIK tax to pay)
Mileage Limits
Most business leases come with an agreed-upon annual mileage. Extra charges will likely apply if you exceed your mileage limit.
No Asset Ownership
Although business leasing does not require the same upfront capital investment as vehicle ownership, the downside is that it means you don’t own the vehicle. At the end of your lease period, you will need to return the car and start a new lease if your business still requires a company car.
How to Lease a Car Through Your Business
Leasing a brand-new car that’s fully tailored to your business needs is actually a fairly straightforward process:
- Check if you’re eligible for business leasing. You’ll need to be a sole trader, or leasing through a partnership, limited company or VAT-registered business.
- Choose a business lease car that matches your business’s requirements. At Morgan Highfield & Land, we’re here to offer you expert advice and help you choose the right lease car for your business. Get in touch with us to learn more.
- Customise your lease vehicle according to your preferences. When you lease with Morgan Highfield & Land, you can choose every element of your brand-new car from the colour to the wheels. You can also add additional interior and exterior features.
- Tailor your lease agreement. You can choose the lease duration, mileage and initial rental, as well as select any optional extras, such as a maintenance package.
- Run a credit check. We’ll take a few details to run a credit check to ensure the agreement is affordable and suitable for your business.
- Your brand-new business lease car is delivered to your door!
Luxury Business Leasing from Morgan Highfield & Land
At Morgan Highfield & Land, we’re experts in prestige vehicle leasing, and we excel at finding the right lease vehicle for your business. There are a lot of different factors that you’ll need to consider, including the tax implications, to ensure you choose a car that meets all your business’s requirements. We offer a free of charge consultation to all our business clients to ensure that you make the right choice.
We offer business lease deals for all the most popular luxury brands, including BMW, Maserati, Porsche, Audi, Polestar and Tesla. Check out our range of special offers for some inspiration.
Our business contract hire deals are always competitive, and we allow you to adjust your initial rental, contract hire term and annual mileage to best suit you and your business’s needs. Whatever your specifications, you can rely on the Morgan Highfield & Land team for all your business leasing needs.
Disclaimer: This article does not consider your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product, considering your objectives, financial situation, and needs.
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