For many business owners, a vehicle is an essential tool. Whether it is for visiting clients, delivering goods, or simply keeping things moving, choosing how to finance a vehicle can have a big impact on cash flow and tax planning. There are several routes to consider, each with its own advantages.

Buying outright

The simplest option is to purchase the vehicle in full. This means your business owns it from day one. Buying outright avoids ongoing finance costs, but it does tie up capital. The tax advantage is that you may be able to claim capital allowances on the cost, reducing taxable profits. Cars with low CO₂ emissions attract more generous allowances, while commercial vehicles such as vans can often qualify for the full Annual Investment Allowance.

Hire purchase

Hire purchase spreads the cost of the vehicle over a fixed term. You make monthly instalments and become the legal owner once the final payment is made. Interest will be payable, but this option gives certainty over repayments and allows you to claim capital allowances on the vehicle as if you had bought it outright.

Finance lease

With a finance lease, your business pays to use the vehicle but never actually owns it. Instead, you may be able to extend the lease at a reduced cost or sell the vehicle on behalf of the finance company and keep part of the sale proceeds. The rentals are tax deductible, which helps to reduce taxable profits.

Contract hire

Contract hire is often called leasing. You agree to use the vehicle for a set period and mileage, paying fixed monthly rentals. At the end of the agreement, the vehicle is returned. This option keeps vehicles off your balance sheet and helps with budgeting, as servicing and maintenance can be included. The rentals are usually deductible for Corporation Tax, but restrictions apply if the car has high emissions.

Personal contract purchase (PCP)

Some directors use PCP agreements through the company. These combine monthly payments with the option to buy the vehicle at the end for a lump sum. The tax treatment is similar to hire purchase if the business owns the agreement, but careful thought is needed if it is held personally.

Final thought

There is no one best option. The right choice depends on cash flow, tax position, and how long you intend to keep the vehicle. Speaking with your accountant before committing can ensure the vehicle is financed in the most efficient way for your business.

If your business operates in a sector covered by the Money Laundering Regulations, you must be monitored by a supervisory authority to ensure compliance. This article outlines who needs to register with HMRC for anti-money laundering (AML) supervision.

Your business must be registered with a supervisory authority if it operates in a sector covered by the Money Laundering Regulations. Some businesses are already supervised through authorisation by bodies like the Financial Conduct Authority (FCA) or professional associations such as the Law Society.

If your business is not already supervised and falls under one of the regulated sectors, you must register with HMRC.

Business Sectors Supervised by HMRC

HMRC is responsible for supervising businesses in the following sectors (where not already regulated by the FCA or a professional body):

• Money Service Businesses not regulated by the FCA
• High Value Dealers handling cash payments of €10,000 or more (in a single transaction or linked transactions)
• Trust or Company Service Providers not supervised by the FCA or a professional body
• Accountancy Service Providers not supervised by a professional body
• Estate Agency Businesses
• Bill Payment Service Providers not regulated by the FCA
• Telecommunications, digital, and IT payment service providers not regulated by the FCA
• Art Market Participants involved in buying or selling works of art valued at €10,000 or more (including linked transactions)
• Letting Agency Businesses managing property or land with a monthly rental value equivalent to €10,000 or more

If your business conducts these activities by way of business and is not already supervised, you must register with HMRC.

Money Service Businesses and Trust or Company Service Providers are not allowed to trade until their AML registration with HMRC is confirmed. Other businesses may continue operating while their registration is being processed.

Trading while not registered is a criminal offence and may result in a penalty or prosecution.

Employers can generally claim tax relief on contributions made to a registered pension scheme by deducting those payments as an expense when calculating their business profits. This reduces the amount of taxable profit and therefore lowers the overall tax bill.

For businesses involved in a trade or profession, employer pension contributions can usually be claimed as a business expense on the proviso that the payments are incurred wholly and exclusively for the purpose of running the business.

If the employer is a company with investment business, the employer contributions should be deductible as an expense of management.

When claiming tax relief on employer pension contributions, there are a few important rules to keep in mind. Importantly, only contributions that have actually been paid qualify for relief. Other amounts recorded as liabilities that have not yet been paid are not eligible for relief until they are paid. This means employers can only claim relief in the accounting period during which the payment is actually made.

The pension tax legislation amends the normal rules regarding what is an allowable deduction and the timing of a deduction.

International employers contributing to a UK-registered pension scheme benefit from the same rules. In addition, the same basis of relief is also given to employer contributions that are referred to as relevant migrant member contributions.

Speculation is growing that rates or allowances applied to dividend income may change in the next Budget.

The current tax rates for dividends received (in excess of the £500 dividend tax allowance) are as follows:

• 8.75% for basic rate taxpayers will pay tax on dividends
• 33.75% for higher rate taxpayers will pay tax on dividends
• 39.35% for additional rate taxpayers will pay tax on dividends

Dividends that fall within your Personal Allowance do not count towards your dividend allowance and you may pay tax at more than one rate.

If you receive up to £10,000 in dividends you can ask HMRC to change your tax code and the tax due will be taken from your wages or pension or you can enter the dividends on your self-assessment tax return, if you already fill one in. You do not need to notify HMRC if the dividends you receive are within your dividend allowance for the tax year.

If you have received over £10,000 in dividends, you will need to complete a self-assessment tax return. If you do not usually send a tax return, you need to register by 5 October following the tax year in which you had the relevant dividend income.

There has been growing speculation ahead of the upcoming Budget that the government could make further changes to the taxation of dividends. With the government under pressure to raise revenue there is the possibility that the rates of dividend taxes could be increased. The current £500 tax‑free dividend allowance could also be abolished altogether, after having been significantly reduced over the last number of years.

Bereaved spouses who lost service pensions before 2015 have until 15 October 2025 to claim a one-off £87,500 recognition payment.

This scheme was launched in October 2023 to help war widows and widowers who lost their service-attributable pensions due to remarriage or entering new relationships before 2015. Since the scheme was launched, over £21 million has been paid out to more than 240 eligible individuals who had previously received no financial recognition for their sacrifice.

The scheme provides a one-off, tax-free payment of £87,500 to those who forfeited their service-attributable pensions prior to 2015 due to remarriage or cohabitation under the old pension rules and were in receipt of no other payments to recognise the loss of their partner.

The scheme applies to widow(er)s, including civil partners and unmarried cohabiting partners, of regular and reservist members of the Army, Navy or Royal Air Force.

The Minister for Veterans said,

‘The War Widows Recognition Payment Scheme has provided vital redress to those who have sacrificed so much for our country. With the scheme closing on 15 October, I urge anyone who believes they may be eligible to apply.’

Applications have slowed recently, but the Ministry of Defence believes there may still be eligible individuals who have not yet applied, and no extensions are planned.

Full details, eligibility criteria, and application forms are available at War Widow(er)s Recognition Payment – GOV.UK