In 2026, the tax rules for entrepreneurs’ cars will change again. The distinction between electric and fuel cars disappears: the same additional tax rate of 22% applies to both. The choice between a company car or a private car therefore remains important. In this article you can read the financial and tax consequences of both options, including examples and a step-by-step plan to make the right choice.
Advantages and disadvantages of the company car
A company car can be attractive if you drive a lot of business kilometers or want to keep costs manageable within your company. All costs will then be charged to the company, but there will be an additional charge if you also use the car privately.
Advantages of the company car:
- You can deduct almost all car costs from your profit (such as fuel, maintenance, insurance, depreciation and interest).
- You keep business and private life separate, which makes the administration clear.
Disadvantages of the company car:
- Do you also use the car privately (more than 500 kilometers per year)? Then you pay addition.
- The car is part of your business assets, which has consequences in the event of a sale or strike.
- The book value of the car affects your balance sheet and can affect financing.
Please note: the templates are now only available for 2025. The 2026 templates are expected in early January 2026 when the figures are final.
Company car: deductible car expenses
All business costs for the company car are deductible. Think of fuel, maintenance, insurance, motor vehicle tax and depreciation. Parking costs and car wash visits also count, as long as they are for business purposes.
Example: a self-employed person drives 20,000 kilometers per year, of which 15,000 are for business purposes. The total annual costs are €6,500. He can claim all these costs as business expenses, which reduces his profit and reduces his income tax liability.
Please note: when purchasing a car, you must take depreciation into account (on average 20% per year over 5 years). You also include these costs in your accounting.
Company car: this is how addition works
If you also use the business car privately for more than 500 kilometers per year, you will have to pay additional tax. This means that a percentage of the list value is added to your income. You pay income tax on that amount.
From January 1, 2026, one fixed percentage applies: 22% for all cars, both electric and fuel. There is no longer a discount for electric cars. That percentage remains valid for 60 months (5 years) from the month after the first admission.
Calculation example:
An electric car with a list value of €40,000 will incur an additional tax of 22% = €8,800 per year in 2026. With an income tax rate of 37%, you pay approximately €3,250 net in tax per year.
Do you hardly use the car privately? Then you can avoid the additional tax by demonstrating that you drive less than 500 private kilometers per year. You provide this proof through a comprehensive trip registration.
Private car: mileage allowance
If you also use your private car for business purposes, you can declare business kilometers to your company. The reimbursement is tax-free up to a certain maximum.
In 2025, the tax-free kilometer allowance was €0.23 per kilometer. According to the Tax Plan, this is expected in 2026 €0.24 per kilometer. You may enter this compensation as costs in your accounting. You can send an invoice to yourself for this or process it as a private deposit. And on the other hand as car costs in your profit and loss account.
Example:
You drive 10,000 business kilometers per year with your private car. At €0.24 per kilometer you can incur €2,400 in costs. You pay all other car costs, such as maintenance and insurance, privately and are not allowed to deduct them.
Private car: no deductible car expenses, everything private
With a private car, the costs are not deductible for business purposes. You pay fuel, insurance, maintenance and road tax completely privately. The only business deduction is the mileage allowance that you grant yourself. This keeps the administration simple, but you can miss out on tax benefits if you drive a lot.
A private car is often cheaper if you travel few business kilometers or mainly use the car privately.
VAT: company car
If you have the car at the company, you can VAT on purchase, maintenance and use deduct, insofar as the car is used for business purposes. If you also use the car privately, you must make an adjustment for private use at the end of the year. The Tax Authorities will then charge a fixed correction 2.7% of the catalog value (including VAT and BPM) per year, unless you have a conclusive mileage registration with which you can demonstrate actual private use.
Example: for a car with a catalog value of €35,000, the VAT correction is 2.7% × €35,000 = €945 per year.
Do you have a so-called margin car? Then the private VAT correction is 1.5% instead of 2.7%. We are talking about a margin car if the car has been owned by a European private individual at least once. The VAT has already been settled once and you cannot do it again.
VAT: private car (with VAT benefit)
If you also use your private car for business purposes, you can deduct part of the VAT on maintenance, repairs and fuel. The deduction applies to the business part of the use. For example, if you drive 30% for business purposes, you can reclaim 30% of the VAT paid.
Please note: the VAT on the purchase of the private car is not deductible. Only running costs are eligible for partial deduction. This can be advantageous if you drive few business kilometers, but still want to reclaim VAT on fuel or maintenance costs.
How do you make the choice?
The best choice depends on your driving behavior, the value of the car and your tax position. If you drive a lot for business and have a car with a high list value, a company car is usually cheaper — even if you pay additional tax. If you mainly use the car for private purposes and only make a few business trips per week, then keeping it private is often better.
Do you want to know exactly what is most beneficial in your situation? Then use the template “Company car or private” from The Happy Financial. This allows you to easily calculate the difference in net costs between both options, including VAT correction and addition.
Use the template to calculate your personal benefit and avoid surprises on your tax return.
Please note: the templates are now only available for 2025. The 2026 templates are expected in early January 2026 when the figures are final.
#Choosing #company #car #private #car #suits #Happy #Financial