Business leasing or Business Contract Hire (BHP) is a vehicle lease contracted through your limited company, partnership or LLP or as a sole trader.
The setup is usually the same as with a personal lease or Personal Contract Hire (PCH), consisting of an initial payment and monthly instalments.
At the end of your contract, the car is handed back to the leasing company.
Check out our comprehensive guide for more information on how business leasing works.
Use our car matching tool to find a flexible solution to meet your leasing budget. Click more options to narrow down the search results.
Yes, absolutely!
The types of organisations that are typically eligible for a business lease include:
There are some exemptions on who is eligible for a business lease, such as private hire or taxi use. However, most types of companies can lease a vehicle, and it often doesn't matter how long you've been trading.
Read our how to get a business car lease guide to learn more about the process.
Personal leasing or Personal Contract Hire (PCH) has a similar setup to business leasing, where you lease a car for a specific period for fixed monthly payments. At the end of your agreement, you hand back the vehicle.
However, there are a few differences between the two options. For example, business leases have some tax benefits, as VAT-registered companies may be able to claim an element of the VAT back. In addition, business lease users can use the car for business and personal use. In comparison, personal lease users cannot use the vehicle for business purposes.
The main differences between business and personal leasing are:
Business leasing is leasing under your business name, and personal is simply leasing it under your own name.
A business lease vehicle will, of course, be used for business purposes but can also be driven for personal use. This does have tax implications – see the section on Company Car Tax further down this article. With personal leasing, you can drive the car solely for personal uses (within your agreed mileage), including commuting to a place of work.
Whether you want a business lease or a personal one, you will have access to the same range of cars and flexibility in terms of deposits and monthly repayments.
Business lease users may be able to claim back an element of the VAT on the lease payments (if they are VAT-registered). They may also be able to claim it back on maintenance plans associated with the vehicle.
The short answer is – VAT!
When searching for personal leases, you'll see the advertised price, including VAT, as this has to be paid on your agreement.
However, business leases are often cheaper if a company is VAT-registered, as the organisation can claim 50% of the VAT on the advertised cost. Plus, there may be VAT savings on maintenance packages.
Learn more about tax benefits in our guide to car lease tax.
If you want to use a car lease on a business contract to commute to and from work or for other personal reasons, you must pay Company Car tax. This is because this element of personal use is seen as a Benefit in Kind, and you'll have to pay personal tax on it.
Benefit in Kind (BiK) is a perk or benefit you receive from an employer that is not included in your salary. For example, a lease car supplied to employees comes under this and is subject to tax, and HMRC defines the amount.
If you're lucky enough to be supplied with a company car, then you could be liable to pay a charge known as Benefit in Kind (BIK) tax. The amount you're required to pay will depend on three things:
As with all taxes, the rules change often.
It's important to know that the slightest change to the options on a vehicle, even something as seemingly insignificant as adding mats, can impact the amount of tax that needs to be paid. So if you're in any doubt about the rate that will apply to your chosen vehicle, contact HMRC to confirm.
Learn more about Benefit in Kind Tax for business leasing in our guide.
There are several considerations and benefits of both business and personal leases. So, if you're deciding on the best option, take a look at which might be more cost-effective.
Business and personal leasing can be beneficial depending on your requirements. This means that comparing the benefits of a business lease vs a personal lease is important to see what’s best for you. Below is a table summarising what each can offer:
| Business leasing benefits | Personal leasing benefits |
| Potentially cheaper than personal leasing | Can drive brand new models |
| VAT can be claimed back | As it’s not a benefit there’s no BiK tax to pay |
| Repairs and maintenance can be claimed | You can have business miles paid by the company |
| Can claim tax relief on expenses | If you sell the company, you can still use the car |
| Business leasing considerations | Personal leasing considerations |
| Will the mileage allowance be enough? | How many miles are in your contract? |
| How much will the BiK costs be? | Are there any optional extras you want to add? |
Check out the benefits of business leasing for more information. Alternatively, there’s a more in-depth breakdown of the different benefits and considerations for business vs personal leasing below.
Securing a business lease deal can potentially be cheaper than a personal lease. This is because of the VAT breaks available for VAT-registered businesses.
Claiming back VAT
If maintenance is included in your deal, 100% of the VAT can be claimed back.
By taking out a maintenance package with a company car, you can claim everything back on that too. Learn more about leasing with maintenance and find out if your company could save even more.
The costs of a lease are usually treated as allowable business expenses. Claiming tax relief on your expenses allows you to reduce taxable profit rather than it being a VAT benefit. Treatment can vary, however, depending on the type of business you run e.g. sole-trader or a limited company.
When you take out a business car lease, you agree to a mileage allowance. If this is exceeded, you will need to pay an excess mileage charge to the leasing company – though at Leasing Options, it could be as little as 10p per extra mile.
If you use a business car lease for personal use, it’s worth considering how much you might have to pay in BiK. Rates differ depending on various factors, including vehicle emissions. So, if you opt for a zero or low-emission car, you’ll save more on tax.
Many of the benefits of personal leasing are shared with business leases. However, there is something that could make this option more appealing:
While personal leases don’t offer company car tax advantages, they can be used for business travel, with costs being reimbursed via mileage allowances.
While you’ll be paying for any miles completed when the vehicle is used for personal use, any business mileage can be claimed back and paid for by the business itself.
When business leasing, your car is tied to the business, so if you sell, you’ll lose access. With personal leasing, it’s in your name so whatever happens to the business, you can drive it regardless.
Working out roughly how many miles you’ll need in your contract is essential, as going over your annual allowance will incur an excess charge.
Adding extras to your car will increase the monthly costs.
Yes, you can use vehicles on a business lease for personal journeys. However, this usage element incurs Benefit in Kind tax as it's seen as a perk.
Learn more about business leasing in our guide to company cars.
Yes, taking out a lease is possible if you're a sole trader or self-employed. There's the option of a personal or business lease. However, unless you’re VAT-registered, you won’t be able to take advantage of the savings on the lease costs.
Learn more in our guide to self-employed leasing.
Leasing Options understands waiting for a new car isn't always possible. Maybe your lease is ending or your car is old, or you like new models. Regardless, we offer in-stock car leases to meet your needs, which could be delivery within as little week.
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Depending on your intended use of the vehicle, one can be better than the other. If you plan on using the car for work then a business lease may be better, whereas a personal lease is more suited to private usage.
It’s not usually possible to change a personal lease into a business lease because each leasing type has different contracts and, in turn, different tax rules and terms.
In short, no. To drive a business lease car, drivers need to have insurance, and the named leaseholder must give permission for anyone else to use it. However, if there are multiple drivers insured on the car, they can all use it if they’re permitted.
If you want to use a car lease on a business contract to commute to and from work or for other personal reasons, you must pay company car tax. This is because this element of personal use is seen as a Benefit in Kind (BiK), and you'll have to pay personal tax on it.
BiK is a perk or benefit you receive from an employer that is not included in your salary. For example, a lease car supplied to employees comes under this and is subject to tax, and HMRC defines the amount.
Learn more about Benefit in Kind tax and how it’s calculated in our guide.
When applying for a business car lease, you’ll typically need to provide three months’ worth of bank statements and audited accounts alongside proof of address and the ID of the company’s main director.
Read our how to get a business car lease for more information.
