Last updated January 12th, 2024
In some circumstances, you can sell a company car. However, there are certain conditions that need to be met.
If the car is registered to a company, you’ll need a written letter of authority from a member of the team who has the right to sell the car (along with a copy of their driving licence and signature). You may also require permission from the company confirming that the car can be sold.
In this guide, we will cover the process to follow for selling a company car and the potential tax implications for doing so. We’ll also explain when you need to pay tax on a company car, how to write off the cost of a company car as a business expense – and calculate your deductions.
The information included in this guide is based on our understanding of tax law at the date of publication. Tax legislation may be subject to change (and may not apply to your individual circumstances), so should not be relied upon.
It is your responsibility to comply with tax law and therefore, you should seek independent advice should you require clarification on any of the topics covered within this guide.
Providing you are authorised to do so, there are numerous options for selling your company car, including:
The selling process for a company car is very similar to that for a privately-owned car.
However, it is likely that you’ll need to provide additional documentation, such as a letter from an authorised team member (along with their driving licence and signature) as proof that you are authorised to sell the company car.
When selling a company car, you’ll need to pay corporation tax or capital gains tax if your car sells for more than the amount you originally paid for it. You may also have to pay capital gains or corporation tax if the car is disposed of differently and you make a profit on it.
If you trade as a limited liability company (LLC), you may have to pay corporation or capital gains tax when you ‘dispose of’ a business asset (e.g. a company car).
His Majesty’s Revenue and Customs (HMRC) will consider you to have disposed of a company car if you:
You will have to pay corporation tax (or capital gains tax, if you are a sole trader using your car for business purposes) if you sell your car for more than what you paid for it.
You may also have to pay capital gains/corporation tax if you ‘dispose’ of the car in another way (e.g. trading it in) and its trade in value exceeds the original price.
You will also need to factor in any capital allowances you have claimed for the car.
If you trade as an LLC, your status may determine how much corporation tax you’ll have to pay.
If you are a sole trader, selling your company car may increase your income tax bill (although you won’t pay capital gains tax).
If you buy a car and use it for business activities at least some of the time, HMRC allows you to claim a tax deduction. This deduction could be for the full price of the car (or a smaller amount), depending on:
Need to calculate the market value of your company car? Enter your reg number into our free car valuation tool.
Imagine you bought a car for £20,000 with your company’s money in 2020. This car emits 25 grams of CO2 per kilometre. HMRC’s current writing down allowance for new cars that emit below 50 g/km is 18%. Therefore, your deductions over the next three years would be as follows:
When it comes to tax liability, whether you’ve sold (or traded in) your car at a profit is not the only consideration. You must also take any allowances that you have previously claimed into account.
If your car’s sale price (or trade-in value) exceeds your total writing down allowances, you’ll need to adjust the allocation. This is also known as a balancing charge (and will increase your overall tax bill).
Put simply, a balancing charge is the opposite of a writing down allowance. Whilst a writing down allowance reduces your tax bill, a balancing charge will increase it.
The aim of a balancing charge is to ensure that disposing of a business asset (in this case, a company car) doesn’t result in you claiming an entitled tax deduction (which may be higher).
Imagine you are a sole trader and bought a car for your business 6 years ago for £11,500.