What Your Limited Company Can Pay For, Including Electric Cars and Tax Free Benefits

Many company directors are unaware of just how much their limited company can legitimately pay for, from electric cars and mobile phones to gifts, staff parties and eye care.

When structured correctly, these can be provided tax-free or at very low personal tax cost, making them far more efficient than taking extra salary or dividends.

Why This Matters for Directors

With dividend taxes rising and thresholds frozen, extracting money from your company is becoming more expensive. Using approved benefits and allowances is often a much more efficient way to take value.

HMRC provides specific exemptions and low-tax benefits that can be used when the rules are followed correctly.

Electric Cars: One of the Most Tax-Efficient Benefits

Fully electric company cars are currently taxed at just 2% Benefit in Kind.

For example, on a £50,000 electric car, the taxable benefit is £1,000. A basic rate taxpayer would pay just £200 per year in personal tax. A higher rate taxpayer would pay £400 per year.

The company also receives corporation tax relief on the lease or purchase costs, and can usually claim 100% first year allowance on the cost of a new electric vehicle.

This makes electric cars one of the most efficient ways for directors to drive a high-value vehicle through their company.

Electric Vans

Electric vans are even more efficient. The Benefit in Kind on electric vans is currently £0 in many cases, meaning no personal tax at all if used privately.

For directors who need a commercial vehicle, this can be an extremely attractive option.

Gifts: The Trivial Benefits Allowance

Your company can provide gifts of up to £50 per item with no tax or National Insurance.

For directors of limited companies, this is capped at £300 per tax year in total.

These must not be cash and must not be a reward for work. Common examples include wine, hampers, flowers or small gift cards.

Staff Parties and Annual Events

Your company can pay up to £150 per person per year for staff parties or annual events with no tax or National Insurance.

This can be used for a Christmas party, summer event or a combination of both, provided the total per head does not exceed £150.

This applies to directors as well as employees, as long as it is a genuine staff event.

Mobile Phones

Your company can provide one mobile phone per employee or director, with the contract in the company name, with no personal tax charge.

This is fully allowable and does not create a benefit in kind.

Eye Tests and Glasses

If you use a computer or screen as part of your work, your company can pay for eye tests and any required corrective glasses with no tax charge.

This is a legitimate business expense and does not trigger personal tax.

Medical and Dental Cover

Medical and dental insurance can be paid for by the company. These are usually treated as benefits in kind, meaning you pay personal tax on the value.

However, the company receives corporation tax relief and many directors still find this more cost-effective than paying personally.

Training and Courses

Your company can pay for training and courses that are relevant to your current role and business activities.

This includes professional development, technical training and skills updates.

Other Common Allowable Benefits

Depending on your circumstances, your company may also be able to pay for:

• Laptops, monitors, desks and office equipment
• Home office costs (where calculated correctly)
• Work-related travel and accommodation
• Meals when working late or traveling for business
• Staff welfare and wellbeing costs

Important Points to Be Aware Of

What is allowable for an employee is not always allowable for a sole director. HMRC often takes a stricter view where there is only one person in the business.

Many benefits are only tax-free if specific conditions are met. Getting this wrong can result in benefit in kind charges, penalties and interest.

HMRC is increasingly focused on benefits, expenses and lifestyle checks as part of compliance activity.

How We Can Help

We help company directors structure benefits and expenses in the most tax-efficient and compliant way possible.

If you are unsure what your company can and cannot pay for, we can review your position and ensure you are maximising allowances without risking HMRC issues.