Key thresholds
15% restriction on car lease payments where CO2 exceeds 50g/km (HMRC BIM47730, current from 6 April 2021; prior threshold was 110g/km for hire periods starting before 1 April 2021). Example from HMRC (BIM47740): £6,000 annual rent × 15% = £900 disallowed; £5,100 claimable. Maintenance charges listed separately in the contract are not restricted.
Common questions
I lease a diesel van for building work at £350 a month. Can I claim the payments?
Yes, for the business-use portion. Vans are not subject to the 15% car restriction. If the van is 100% for work, claim the full £350. If you use it personally too — say 20% personal — claim 80%, which is £280 a month.
I lease a petrol car (150g/km CO2) and use it 100% for work. What can I claim?
Because CO2 is above 50g/km, 15% of the cost is blocked. At £400 a month, only £340 (85%) is claimable. The other £60 per month cannot be claimed. If the car is also used personally, reduce the 85% further by the personal-use proportion.
I lease an electric car for site visits at £500 a month. Is there a restriction?
No restriction. Electric cars emit 0g/km CO2, so the 15% rule does not apply. Claim 100% of the business-use portion of the payments.
Watch out for
—Double-cab pick-ups changed from April 2025. HMRC no longer treats them as vans for leasing purposes. Contracts started before 1 April 2025 had transitional relief until 1 October 2025. After that, car rules apply regardless of when you signed.
—Hire purchase is different from a standard lease. Under hire purchase, you are treated as the owner from the start, so you claim capital allowances on the purchase price rather than deducting the monthly payments. The interest element is still deductible as a finance cost.
—If your lease bundles in a separately stated maintenance charge, the 15% restriction applies only to the rental element, not the maintenance part (HMRC BIM47740).
Common mistakes
—Trying to claim capital allowances on a leased vehicle. You do not own it, so capital allowances do not apply. Claim the monthly payments as a running cost instead.
—Missing the 15% restriction on high-emission car leases. Only 85% of the cost is claimable for cars over 50g/km CO2.
—Treating double-cab pick-ups as vans for contracts entered into or renewed after April 2025. HMRC changed its position and most are now treated as cars.
Cash basis vs traditional accounting
Lease payments are a day-to-day cost on both traditional and cash basis. You deduct what you paid in the period. The 15% car restriction and any personal-use split apply the same way on either method.
This covers sole trader rules only. The 15% restriction applies under ITTOIA 2005 s48-s49 for Income Tax.
HMRC guidance does not explicitly address finance leases (as opposed to operating leases/contract hire) for sole traders — verify with an accountant if your arrangement is a finance lease.
CO2 emissions thresholds have changed over time; always use the threshold applicable to when your hire period began.
HMRC sources
Last verified: May 2026 · Tax year 2026/27