Are business car lease payments tax deductible?
Yes, if you are a Limited Company you can use your monthly lease payments to offset your corporation tax. If you are a Sole Trader or Partnership you can also offset your lease costs against your annual tax bill.
However, the amount you can offset will depend on the car that you lease. Your vehicle will only be completely tax-deductible if the car in question emits less than 110g/km. For vans, you can offset 100% of the cost regardless of the lease van’s emissions.
Cars that emit 111g/km or more still qualify as tax-deductible, but only up to 85 per cent of its value. A rule that was introduced in 2018 saw a 15 per cent tax disallowance placed on vehicles with higher CO2 emissions.
Capital Allowance cannot be claimed on a leased car as you are not the vehicle owner and are not buying outright.
Can you claim back VAT on your car lease payments?
One of the major benefits that come with business leasing is the ability to reclaim VAT on your initial and monthly payments. However, this is only possible if you are VAT registered.
If you use the vehicle solely for business purposes and has no personal use outside of work, you can claim 100 per cent VAT back against your monthly cost. If your business lease car is used for personal journeys outside of work, you can claim up to 50 per cent VAT.
Another perk is that additional charges associated with lease cars or vans, classed as service charges, also have tax benefits. Excess mileage charges and maintenance packages, for example, are considered service charges. If they apply to your lease deal, you can claim 100 per cent VAT back on those charges and offset 100% of the charges against your annual tax bill.
We offer all Carparison customers the opportunity to add a maintenance package to their monthly payments. The package includes things like scheduled services, tyre repairs, MOTs and a complimentary wash and vacuum.
This allows for easy budgeting, which can be invaluable, especially in the current climate. When you agree to the terms of your lease, you will find a fixed monthly payment that suits you and if you take advantage of our maintenance package, there is not much else to take care of apart from your fuel!
We appreciate that business owners have enough on their plate, so leasing offers a stress-free driving experience.