Deciding whether to buy or lease a company car is not just a practical choice; it is also a tax decision. The option you choose can affect your corporation tax bill, cash flow, and the total cost of running the vehicle through your business.

This guide explains the key differences between buying and leasing a company car, how the tax treatment works, and what business owners should consider before committing.

Buying a Company Car Through Your Business

When a company buys a car, either outright or using finance, the vehicle becomes a business asset. The way tax relief is claimed depends on whether the car is new or used, its CO2 emissions, and how it is financed.

Tax Treatment When Buying a Company Car

Brand new electric cars: If your company purchases a brand new, fully electric car, the full cost of the car can be deducted from taxable profits in the first year. This is known as a First Year Allowance. For many businesses, this makes buying a new electric car very tax-efficient as you do not have to spread the relief over several years.

Example: If your company buys a new electric car for £40,000, the company can deduct the full £40,000 from its profits in the year of purchase. At a corporation tax rate of 25%, this could reduce the tax bill by £10,000 in that year.

Used electric cars: Used electric cars do not qualify for the 100% allowance. Instead, tax relief is spread over several years, starting at 18% per year, and reducing each year thereafter. Business owners regularly overlook this difference when comparing new and used electric vehicles, as it is often assumed that all electric cars receive the same tax treatment.

Example: A used electric car that costs £30,000 may only give a tax relief of £5,400 in the first year, rather than the full amount.

Petrol and diesel cars: For petrol and diesel cars, tax relief depends on CO2 emissions:

• Lower-emission cars may qualify for 18% annual allowances.
• Higher-emission cars may be restricted to 6% per year.

This means that it can take many years to fully claim tax relief, making these vehicles less tax-efficient when bought through a company.

Buying With Finance: HP and PCP

Most businesses do not buy cars outright in cash. Two common finance options are Hire Purchase and Personal Contract Purchase:

Hire Purchase (HP): With HP, the company is treated as owning the car from the start. This means capital allowances can usually be claimed, including the 100% relief for new electric cars, and interest payments are typically allowable as a business expense.

Example: A new electric car bought on HP for £45,000 can still qualify for 100% tax relief in year one, even though the business pays for it monthly.

Personal Contract Purchase (PCP): PCP works slightly differently. While monthly payments are lower, ownership may not transfer until the final payment. The final balloon payment and ownership structure affect how capital allowances apply, so this option needs careful review before proceeding.

Leasing a Company Car Through Your Business

Leasing, often referred to as contract hire, means the business never owns the vehicle. Instead, it pays a fixed monthly amount to use the car for an agreed period.

Tax Treatment When Leasing a Company Car

Lease payments are usually treated as an ongoing business expense, which means that tax relief is spread across the life of the lease rather than claimed upfront.

For VAT-registered businesses, 50% of the VAT can usually be reclaimed on the lease payments, and 100% of VAT can usually be reclaimed on maintenance costs.

For many businesses, this provides predictable costs and steady tax relief each month. However, it does mean there is no large tax deduction in year one, even for electric vehicles.

There may also be restrictions on how much of the lease cost is tax-deductible for higher-emission cars.

Example: If your company leases a car for £500 per month plus VAT, the annual cost to your business is £6,000 plus VAT. The business can then usually reclaim £600 of the overall £1,200 VAT, and the remaining lease cost is deducted from profits over the year.

Practical Considerations With Leasing

There are some benefits to leasing a vehicle, as leasing arrangements often include servicing and maintenance, road tax, and breakdown cover. However, mileage limits will apply, and the charges for excess milage can be significant.

Benefit in Kind and Personal Use

If a company car is available for personal use by a director or employee, a Benefit in Kind (BiK) charge may apply. This is taxed personally and also attracts employer National Insurance.

Electric cars currently have much lower BiK rates than petrol or diesel cars, which is why they remain a popular choice for company vehicles. However, these rates are set to increase gradually over the next few tax years.

More significantly, there are planned changes from the 2028/29 tax year, which will affect the BiK treatment of electric company cars. While electric vehicles are still expected to remain more tax-efficient than petrol or diesel alternatives, the personal tax cost for drivers is likely to rise.

This is particularly relevant when entering into multi-year agreements, such as a three-year lease. The BiK rate in the final year of the lease may be higher than when the vehicle was first taken on, which can impact personal tax planning for directors and employees.

For this reason, it is important to consider not just today’s BiK rate, but how future changes could affect the overall cost of having a company car over the full term of ownership or lease.

Choosing the Right Option for Your Business

There is no single correct answer when deciding whether to buy or lease a company car. The most tax-efficient option depends on the type of car, how it is financed, how it is used, and the wider financial position of the business.

The examples in this article provide general guidance only. Specific advice will depend on your circumstances, including future plans, profitability, and personal tax exposure.

This is where GLX can help you with tailored advice, ensuring the decision supports both your business and personal finances.

For further advice on whether you should buy or lease a company car, contact our team today.

Understanding the difference between cash flow and profit can help you make better financial decisions and, although both are signs of how healthy your business is, they don’t always tell the same story.

What Is Profit?

Profit is what’s left after you subtract your costs from your income.

In simple terms: Profit = Income – Expenses

There are three main types of profit:

• Gross profit: what’s left after you take away the direct costs of producing goods or services (like materials or labour).
• Operating profit: the profit after all regular business costs, such as rent, wages, and insurance.
• Net profit: the final figure after everything, including tax and interest, has been deducted.

Profit is what appears on your profit and loss statement, and it shows whether your business model works over time.

However, you can be profitable on paper and still run into cash problems. That’s where cash flow comes in.

What Is Cash Flow?

Cash flow is the movement of money in and out of your business.

Positive cash flow means more money is coming in than going out. Negative cash flow means your expenses are higher than your income during a certain period.

Even a profitable business can experience negative cash flow if:

• Customers take a long time to pay invoices.
• You’ve purchased equipment or stock upfront.
• You’re growing quickly and spending before income catches up.

This is why understanding cash flow is essential for keeping your business running day to day.

The Key Difference Between Cash Flow and Profit

The main difference between cash flow and profit is that:

• Profit measures your overall financial performance.
• Cash flow measures your business’s ability to stay liquid and meet short-term commitments.

Profit is recorded when income is earned and expenses are incurred, even if the money hasn’t yet changed hands, and cash flow tracks when those payments happen.

A Real-Life Example

Imagine you invoice a customer £2,000 for a job. To complete the work, you had to buy materials costing £600. On paper, your profit is £1,400 which looks great on your profit and loss report however, you’ve given the customer 30 days to pay.

So while your accounts show a healthy profit, your cash flow is actually -£600 until the money arrives and you’re temporarily out of pocket, even though the job was profitable.

This is one of the most common issues small businesses face. They’re profitable on paper, but the timing of money coming in and out leaves them short when they need to pay suppliers, wages, or tax.

How Businesses Can Manage This Issue

There are practical ways to reduce cash flow pressure caused by timing:

• Take deposits upfront: For example, asking for 25–50% before starting the work helps cover materials and protects your cash position.
• Use staged or milestone payments: Instead of invoicing £2,000 at the end of a project, you might invoice £1,000 at the start and £1,000 on completion. This spreads risk and keeps cash moving.
• Shorten payment terms where possible: Moving from 30 days to 14 days can make a significant difference, especially for service-based businesses.
• Automate reminders and follow-ups: Many businesses suffer cash flow stress simply because invoices sit unpaid and unchased.

Why Both Matter for Your Business

If you only look at profit, you might think your business is performing well, but a cash shortage can stop you paying staff, suppliers, or taxes on time.

If you only look at cash flow, you might miss the bigger picture, like whether your business model is sustainable in the long run.

Keeping an eye on both gives you a full view of your financial health, which is why many businesses use management accounts and cash flow forecasts to monitor both regularly.

At GLX, we help business owners translate their numbers into clear insight. Whether you want to understand how cash moves through your business, or how profitable your operations really are, our team can guide you through it in plain English, and help you make confident, informed decisions about the future.

Companies House has announced that several of its statutory fees will increase from 1^st February 2026.

These changes form part of Companies House’s ongoing transformation under the Economic Crime and Corporate Transparency (ECCT) Act, which aims to strengthen the integrity of the UK business register and combat fraudulent activity.

Key Fee Changes

From 1^st February 2026, the following digital filing fees will apply:

• Company incorporation: increasing from £50 to £100

• Confirmation statement: increasing from £34 to £50

• Voluntary strike off: increasing from £8 to £13

A full list of all revised fees is available on the Companies House website.

Why the Changes Are Being Made

Companies House explains that its fees remain low by international standards, even after these increases. The income generated from these fees supports:

• The incorporation of companies and publication of reliable company information used widely across the UK economy.

• The implementation of new powers under the ECCT Act, which enable Companies House to query, challenge, and remove false or misleading information from the register.

• Enhanced enforcement activity, including funding for The Insolvency Service’s company investigation and director disqualification work.

What This Means for Businesses

The changes are part of a wider effort to build a more transparent and trustworthy marketplace for legitimate UK businesses. 

As part of this modernisation, compulsory identity verification will come into force from 18 November 2025, ensuring that individuals who set up or manage companies are verified. 

Companies House is also investing in modernised digital systems, additional staff, and improved tools to detect and prevent fraud more effectively.

While the upcoming increases may feel significant, they reflect a broader move towards greater corporate transparency and protection for genuine businesses.

How GLX Can Help

At GLX, we’ll continue to support our clients through these upcoming changes, from company incorporations and annual compliance filings to guidance on new identity verification requirements.

If you have any questions about how these updates may affect your business, please don’t hesitate to get in touch with your Client Manager.

As a director of a Limited Company, protecting both your business and your employees is vital. One way to achieve this is by putting the right insurance policies for directors in place. These policies can be paid through your Limited Company without triggering a benefit in kind, making them both practical and tax-efficient.

Why Insurance Policies for Directors Are Important

Running a Limited Company comes with responsibilities, not only to shareholders, but also to employees and their families. Having the right protection in place ensures financial security, supports business continuity, and helps attract and retain valuable staff.

In this guide, we’ll explain the most important insurance policies for directors, including Relevant Life Insurance, Death in Service cover, and Key Man Insurance.

Relevant Life Policy

What is a Relevant Life Policy?

A Relevant Life Policy is one of the most tax-efficient insurance policies for directors. It provides a death-in-service benefit for employees, including directors, by paying a lump sum to the insured person’s beneficiaries if they die or are diagnosed with a terminal illness while employed by the company.

Benefits of a Relevant Life Policy:

• Tax Efficiency: Premiums are usually eligible for Corporation Tax relief, reducing overall costs for the company.
• Employee Attraction and Retention: Including this policy in your benefits package makes your company more appealing to potential hires and helps retain existing employees.

Death in Service Insurance

What is Death in Service Insurance?

Death in Service cover is another valuable option when considering insurance policies for directors. It provides a tax-free lump sum to an employee’s beneficiaries if they pass away while employed by the company.

Benefits of Death in Service:

• Financial Security: Helps the employee’s family cover major costs such as mortgage repayments, funeral expenses, and day-to-day living costs.
• Cost-Effective: Offers high value at relatively low cost, making it an attractive benefit for employees.

Key Man Insurance

What is Key Man Insurance?

Key Man Insurance is a business insurance policy that provides financial protection to a company if a key person, such as a director or critical employee, passes away or becomes disabled.

Benefits of Key Man Insurance:

• Financial Protection: Provides a cash payout to offset lost revenue, cover recruitment costs, or support ongoing business operations.
• Business Continuity: Ensures the company can continue running smoothly despite the loss of a critical person.

Choosing the Right Insurance Policies for Directors

Each Limited Company is different, and the right cover depends on the size of your business, the nature of your work, and your long-term goals. By putting the right insurance policies for directors in place, you’ll not only protect your business but also safeguard your employees and their families.

If you require further information on the various insurances available to you as a director, please get in touch. 

This August marks a major milestone for us; it’s our 20th anniversary!

Watch our video below to hear our Managing Director, Jack Presland, reflect on our journey; from Graham Lewis’ vision when he founded GLX 20 years ago, to who we are today and the values that continue to drive us.

We would also like to take this opportunity to thank everyone who has been a part of our GLX journey to date.

We are extremely proud to be where we are, and we couldn’t have done it without our team, clients, and partners.

Here’s to the next chapter!

Following on from our introduction to Making Tax Digital blog, we’ve answered some of the most common questions we have been asked. Take a look at our FAQ’s below:

We love supporting the local community, and this season, we were delighted to sponsor the Thorpe St Andrew Leopards Under-15s football team.

Managed by our very own Duncan Smith, the Leopards stepped up a league after gaining promotion the previous year, and this season was filled with growth, determination, and plenty of memorable moments!

Speaking about his team, Duncan says: “After an anxious start to the season, the team quickly settled down and got into a good rhythm after the first few games.

They all looked very smart in their kits sponsored by GLX, and with lots of wins, some draws, and a couple of losses, we ended the season mid-table.

We couldn’t run a team without all the support from our players, parents, coaches, and GLX for providing their matchday kit, and we look forward to working with them for many seasons to come!”

It seems that HMRC have been talking about Making Tax Digital for a long time and, in fact, it was ten years ago it was first announced. What followed was a number of delays, but it has been confirmed that this is finally happening! 

You may even be reading this blog because HMRC have sent you a letter saying you might be required to register from 6 April 2025. A lot has become clearer with regards to what this will involve, and GLX are here to keep you up to date with any further developments.

So ‘What do you need to do?’ The first thing is to not panic; you may already have systems in place that will be suitable, and even if you do not then we have a year to work out the right solution for you. The important thing is to engage with your accountant and work with them to find the easiest and best solution for you.

If you already have a self-employed business or are a landlord, and are below the VAT threshold, you will be very used to only having to submit a tax return to HMRC once a year, with a January deadline. 

Maybe currently you are someone who uses software to quickly and efficiently complete your record keeping in a few minutes on a Friday afternoon before then having the weekend to enjoy family life, or maybe you are the sort of person who just drops off a shoe box full of receipts to your accountant once a year! The great news, in both scenarios, is you are currently keeping records in line with HMRC requirements (and we love working with you equally)!

However, from 6^th April 2026 businesses who have combined self-employed and rental income of £50,000 (That is the total amount of receipts, before any expenses; not profit) will have to submit an update of the year to date profits, every quarter, in an electronic format to HMRC. This will need to be made within a month and 7 days of the period end, as well as a final statement by 31 January the year after. 

The essential requirement of MTD is that businesses must maintain their records in a digital format. This can include compatible software or spreadsheets. Maintaining records in paper format ceases to meet the legal requirements.

The first year will look a little something like this:

1. Submission 1 – Quarter: 1 April 2026 – 30 June 2026

• Due: 7 August 2026

2. Submission 2 – Quarter: 1 April 2026 – 30 September 2026

• Due: 7 November 2026

3. Submission 3 – Quarter: 1 April 2026 – 31 December 2026

• Due: 7 February 2027

4. Submission 4 – Period: 1 April 2026 – 31 March 2027

• Due: 7 May 2027

5. Final Submission (Year-End Report): 1 April 2026 – 31 March 2027

• Due: 31 January 2028 (along with any tax due)

As you can see you will have this will mean that you have to submit information to HMRC much more regularly. By working with your accountant to ensure you have the right system in place, that works best for you, should minimise the hassle of this and there are a number of benefits to this;

You will have much better year to date figures than just doing it at the end of the year. This means your accountant can project tax liabilities further ahead meaning you never have a nasty shock when January comes round. Secondly, if ever asked to provide estimated figures for financing or other purposes you will have these to hand. Finally, by submitting quarterly you are not creating more work, but splitting it over the year, hopefully meaning less stress overall.

Ultimately, working closely with your accountant we aim to make this transition as smooth as possible. 

We will be posting a number of blogs in the following months as the final details are announced to ensure you are kept fully up to speed, and if you are an existing client we will contact you during the preparation of the 24/25 tax return to let you know if you will need to join in April 26 and to get all the building blocks in place to ensure complying with Making Tax Digital is stress-free.

If you have any queries around Making Tax Digital or would like to know more about how GLX can help you, contact us today.

Did you know that misunderstanding Director’s Loan Account rules is one of the most common causes of tax and cashflow issues for small companies and their Directors?

A Director’s Loan Account (DLA) records money you take from or lend to your company outside of salary or dividends, such as expenses you pay for the company, cash withdrawals, or loans between you and your company.

At GLX, we regularly speak with directors who are surprised to learn just how easy it is to fall foul of DLA rules. We understand that running your business is your priority, but understanding how much you can withdraw as a business owner is crucial.

Here are some Director’s Loan Account rules to be aware of:
– Taking out more money than you’ve put in creates an overdrawn DLA. This means you owe money back to the company. If you don’t repay the overdrawn amount within 9 months after the company’s year-end, the company faces a Corporation Tax charge of 32.5% (known as Section 455 tax).
– Loans under £10,000 can be interest-free. For loans above this, interest must be charged. If not, the difference is treated as a benefit in kind and reported on a P11D, potentially creating a personal tax liability.
– Repaying the loan within the deadline avoids the Section 455 charge. The company can reclaim this tax if repaid later, but this can create cash flow challenges.
– Writing off the loan or treating it as a dividend can trigger further personal tax implications.
– Regularly documenting and reconciling your DLA helps prevent surprises and ensures your accounts are accurate.

HMRC monitors Director’s loans closely and may impose penalties for non-compliance, so making sure you are well informed will help you avoid any issues in the future.

If you’re unsure about your Director’s loan or need help managing withdrawals and tax effects, contact GLX to discuss your situation and we will guide you every step of the way.

Introducing Bonnie Sartin to the GLX team as our Senior Payroll Administrator!

With over 12 years of experience in both in-house and bureau payroll environments, Bonnie brings a wealth of knowledge and expertise to our payroll function.

Her background includes more than a decade supporting a local health authority, navigating complex payroll processes, TUPE transfers, multiple staff contracts, and time & attendance systems.

Bonnie has also worked closely with a wide range of clients, becoming their trusted first point of contact and delivering accurate, tailored support with a keen eye for detail and excellent communication.

Outside of work, she enjoys spending time with family and friends, and taking her dog Elvis for long walks. She is also a keen foodie with a passion for cooking, and loves a good drama binge on Netflix!

Welcome, to the team Bonnie!!