Last Updated: February 2026
Applies to: Ireland
Every week, someone asks us the same question.
"Should I put my car through the business or just claim mileage?"
It sounds simple. It's not. This decision affects your tax bill, your cash flow, and how stressed you'll be if Revenue ever comes knocking. Make the wrong choice and you quietly lose money every year.
This guide is written for Irish service-based businesses with 2 to 5 employees and turnover between €200,000 and €2,000,000. If you use a car for work and want a straight answer, keep reading.
What Are Your Two Main Options?
Option 1: Claim mileage using your personal car
You own the car personally. The business doesn't own it. You claim mileage for business journeys at [Revenue-approved rates](https://www.revenue.ie/en/employing-people/employee-expenses/travel-and-subsistence/civil-service-rates.aspx).
As of January 2025, the [civil service mileage rates](https://www.revenue.ie/en/employing-people/employee-expenses/travel-and-subsistence/civil-service-rates.aspx) cover fuel, wear and tear, insurance, tax, and maintenance in one rate. You don't separately claim petrol or repairs.
For most cars up to 1,500cc, the rates are €0.4531 per km for the first 6,437km, then €0.7579 per km up to 25,295km, then €0.3027 per km thereafter.
Option 2: The business owns or leases the car
The car becomes a business asset. The business pays running costs. You claim expenses based on business use. You deal with Benefit in Kind (BIK) rules if you use the car privately.
This option has more moving parts, more rules, and significantly more risk if done incorrectly.
When Does Claiming Mileage Make Sense?
Mileage claims work best when business travel is moderate, you do both personal and business driving, the car is already owned personally, and you want simplicity.
For many directors and sole traders, mileage is the cleanest option by far.
The Hidden Strength of Mileage Claims
Mileage claims are predictable.
If you drive 10,000 business kilometres, you know exactly what you can claim. No capital allowance calculations. No private use restrictions. No VAT complications.
As long as journeys are genuinely business-related, you keep a proper log, and claims match reality, Revenue generally accepts mileage claims without fuss.
The Biggest Mistake People Make with Mileage
Poor records.
Mileage claims require dates, destinations, purpose, and kilometres travelled. "I drive around for work" is not a record.
If Revenue reviews a mileage claim and the log is weak, the entire claim can be disallowed. Not partially. Entirely.
According to [Revenue guidelines](https://www.revenue.ie/en/employing-people/employee-expenses/travel-and-subsistence/civil-service-rates.aspx), you must keep accurate records. In practice, this means a mileage log with dates, locations, purpose, and distance.
When Does a Company Car Make Sense?
Putting a car through the business can make sense when business use is very high, the car is expensive to run, and the vehicle is genuinely central to operations.
Examples: sales roles covering large territories, technical services requiring on-site visits, businesses with dedicated commercial vehicles.
It rarely makes sense just because you like the idea of the business paying for your car.
How Do Capital Allowances Work on Company Cars?
When the business buys a car, you claim [capital allowances](https://www.revenue.ie/en/companies-and-charities/corporation-tax-for-companies/corporation-tax/capital-allowances-and-deductions.aspx) over time. According to [Revenue guidance](https://www.revenue.ie/en/tax-professionals/tdm-wm/income-tax-capital-gains-tax-corporation-tax/part-11/11-00-01.pdf), the rate is 12.5% per year over 8 years.
Capital allowances are capped at €24,000, even if the car costs more.
The amount you actually claim depends on CO2 emissions. For cars with emissions over 155g/km purchased from 2021 onwards, you get nothing. Zero capital allowances.
If a car is used 50% privately, only 50% of allowable costs are deductible. Many owners are surprised by how little relief they get once private use is factored in.
What Is Benefit in Kind and Why Does It Matter?
If a company provides a car that's available for personal use, [Benefit in Kind (BIK)](https://www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/private-use-company-cars/index.aspx) applies.
This means you're taxed personally on the benefit, the company may pay employer PRSI, and the calculation depends on CO2 emissions, mileage, and vehicle value.
BIK is calculated as a percentage of the car's Original Market Value (OMV) - the list price when new, including VRT, VAT, and delivery.
BIK Rates for 2025
According to [Revenue's BIK guidelines](https://www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/private-use-company-cars/calculate-value-benefit.aspx), for a typical Category C car (141-155g/km):
- Business mileage under 24,000km per year: 30% of OMV
- Business mileage 24,000-32,000km: 24%
- Business mileage 32,000-40,000km: 18%
- Business mileage over 48,000km: 6%
Example BIK Calculation
Your company provides a car worth €35,000 with emissions of 145g/km. You drive 20,000km for business annually.
BIK calculation: OMV after €10,000 reduction (available in 2025): €25,000. Category C with under 24,000km business mileage: 30%. Annual BIK value: €25,000 × 30% = €7,500.
This €7,500 is added to your taxable income. If you're in the 40% tax bracket, you pay an additional €3,000 in income tax, plus USC and PRSI - approximately €3,800 total.
This is where company car strategies fall apart. A car that "saves tax" on paper creates a personal tax bill that wipes out the benefit.
The VAT Problem Most People Get Wrong
VAT on cars is heavily restricted in Ireland.
According to [Revenue VAT guidelines](https://www.revenue.ie/en/tax-professionals/tdm/value-added-tax/part03-taxable-transactions-goods-ica-services/Goods/recovery-of-vat-on-motor-vehicles.pdf):
- VAT on passenger car purchases is generally not recoverable
- VAT on running costs may be partially recoverable
- Mileage claims include VAT implicitly, but you don't reclaim it separately
There's a limited exception. For cars purchased after 1 January 2009 with CO2 emissions below 156g/km, you can reclaim 20% of VAT if the car is used at least 60% for business.
Claiming VAT incorrectly on cars is a common Revenue audit trigger. This is where DIY decisions go wrong quickly.
Vans and commercial vehicles have more favourable treatment - full VAT recovery is generally allowed, BIK rules are more lenient, and capital allowances are simpler.
Comparing the Two Options in Real Life
A director drives 15,000km per year: 10,000km business, 5,000km personal.
Mileage Route
Annual claim (1,400cc car):
- First 6,437km: €2,916
- Remaining 3,563km: €2,701
- Total claim: €5,617
Tax-deductible to the business. No BIK. No VAT complications. Simple log required.
Company Car Route
Business buys €30,000 car (Category C, 150g/km).
Year 1 relief:
- Capital allowance: €24,000 × 12.5% × 67% business use = €2,004
- Running costs: €3,000 × 67% = €2,010
- Total deduction: €4,014
BIK charge on director:
- OMV after reduction: €20,000
- BIK at 30%: €6,000
- Personal tax at 40% plus USC/PRSI: approximately €3,200
The mileage route produces a higher deduction (€5,617 vs €4,014) with zero personal tax. The company car creates a €3,200 personal tax bill.
Why "Putting It Through the Company" Is Often Emotional, Not Rational
Many owners want the company car because it feels like a perk or feels more professional.
Tax efficiency doesn't care about feelings.
The right question isn't "can I do this?" but "does this actually leave me better off after tax, BIK, and admin?"
Very often, the answer is no.
What Revenue Actually Looks for in Audits
Revenue focuses on consistency, documentation, and reasonableness. They don't expect perfection. They do expect logic.
Red flags: no mileage logs, cars clearly used mostly privately but fully claimed, VAT reclaimed incorrectly, frequent changes without explanation.
Pick a method. Apply it properly. Keep records.
How to Decide Which Option Is Right for You
Answer these honestly:
1. How many business kilometres do I actually drive?
2. How disciplined am I with records?
3. How much private use is there really?
4. Do I want simplicity or maximum optimisation?
A Simple Rule of Thumb
If business mileage is moderate (under 20,000km), private use is significant, and you want low hassle: mileage usually wins.
If business use is dominant (over 30,000km), the vehicle is essential to operations, and you're comfortable with complexity: a company vehicle may make sense.
But run the numbers properly before committing.
Frequently Asked Questions
Can I switch from claiming mileage to a company car later?
Yes, but handle it properly. The switch needs to be clean and consistently applied within each period. If you start claiming mileage and later decide to buy a company car, you're not "changing your mind" in Revenue's eyes – you're starting a new arrangement. Make sure both methods are applied consistently and properly documented. There's no penalty for switching, but the transition needs to be handled correctly from a tax perspective.
What if I already have a company car but it's not working out?
You can absolutely sell the company car and switch to mileage claims. However, if you sell the car for less than its tax written-down value, you may get a balancing allowance. If you sell it for more, there may be a balancing charge. The BIK issue stops once the car is no longer available for your private use. Many business owners discover the company car route isn't as beneficial as they thought and successfully switch to mileage claims.
Do I need physical mileage logs or can I use an app?
Revenue accepts digital records, and many business owners now use mileage tracking apps that automatically log journeys using GPS. What matters is that the records are contemporaneous (recorded at the time, not reconstructed later), accurate, and contain all required information: date, destination, business purpose, and distance travelled. Whether that's a paper logbook, Excel spreadsheet, or a dedicated app doesn't matter to Revenue – the content and accuracy do.
What about electric vehicles – are they treated differently?
Electric vehicles have significantly more favourable treatment. For 2025, there's a [€35,000 reduction](https://www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/private-use-company-cars/exemptions.aspx) to the Original Market Value when calculating BIK, plus an additional €10,000 reduction that applies to all low-emission vehicles. This means a €50,000 electric car could have an effective OMV of just €5,000 for BIK purposes in 2025. Electric vehicles also qualify for [100% accelerated capital allowances](https://leyton.com/ie/insights/articles/everything-businesses-need-to-know-about-capital-allowances-in-ireland/) up to the €24,000 cap until 31 December 2025. However, these reliefs are being tapered down from 2026 onwards, so the current generous treatment won't last forever.
What if Revenue audits my mileage claims?
Revenue can request your mileage log, proof of the business purpose for each journey, and evidence that the journeys actually occurred. If you can't provide adequate documentation, they can disallow the entire claim – not just the questionable portions. This is why keeping proper, contemporaneous records is critical. The good news is that if your records are solid and your claims are reasonable, mileage audits are typically straightforward. Revenue isn't looking to trip you up; they're looking for obvious fraud or negligence.
Can I claim mileage if I'm a director of my own company?
Yes, absolutely. Directors can claim mileage for business journeys in their personal cars. The company reimburses the director at the civil service rates, and this reimbursement is a tax-deductible expense for the company. There's no BIK charge on properly claimed mileage. However, you need to be particularly careful with record-keeping as Revenue pays closer attention to director expenses than employee expenses.
What happens if I use the car for both business and personal trips?
This is the most common scenario. With the mileage approach, you simply track and claim the business journeys only. With a company car, you need to calculate the business use percentage and restrict your capital allowances and running costs accordingly. Plus, you'll face a BIK charge on the personal use element. This is precisely why mileage often wins – it's much simpler when there's mixed use.
Does it matter what type of car I drive for mileage claims?
Not really. The mileage rates are based on engine size categories, so your claim amount will vary slightly depending on whether you drive a 1,200cc car or a 2,000cc car. But Revenue doesn't care if you drive a 15-year-old Corolla or a brand new BMW – the claim is based on the mileage rate for that engine size, not the car's value. This is another simplicity advantage of the mileage route.
Can I claim both mileage and running costs?
No. The mileage rate is designed to be all-inclusive. It covers fuel, insurance, tax, wear and tear, and all other running costs. If you claim mileage, you cannot also separately claim petrol receipts, servicing costs, or insurance. It's one or the other. This is a common mistake that gets flagged in audits.
How long do I need to keep mileage records?
Revenue requires you to keep business records for at least [six years](https://www.revenue.ie/en/self-assessment-and-self-employment/keeping-records/index.aspx). This applies to mileage logs just as much as any other business expense records. Don't delete those apps or throw away those logbooks after doing your tax return – keep them for the full six years in case of audit.
Ready to Get This Right?
Cars shouldn't be complicated. But they often are.
The difference between doing this right and doing it wrong isn't dramatic – it's a slow leak. A few thousand euro here. Unnecessary stress there. A Revenue query you're not quite prepared for.
Most business owners either overcomplicate this or oversimplify it. They either put everything through the company without understanding BIK, or they claim nothing because they're not sure what's allowed.
Neither approach is right.
The right approach is to look at your actual situation – how much you drive, what you use the car for, what your goals are – and make a decision based on numbers rather than guesswork.
That's what we do every day at First Accounts.
We help small business owners in Ireland navigate exactly these kinds of decisions. We run the numbers. We show you what you're actually entitled to claim. We help you set up systems that work. And when Revenue comes asking questions, we make sure you've got the documentation to back up every claim.
If you're not sure whether you should be claiming mileage or running a company car, get in touch today.
We'll look at your specific situation, run the calculations properly, and tell you what actually makes sense for your business. No guesswork. No generic advice. Just clear answers based on your reality.
Reply within 24 hours. No stupid questions. No judgment about what you've been doing until now.
That's our guarantee.