Personal Contract Hire (PCH) is leased in your own name with VAT included in the price and no business-use restrictions. Business Contract Hire (BCH) is leased through a limited company or as a sole trader/partnership, and VAT-registered businesses can typically reclaim 50% of the VAT on the finance element if there's any private use, or up to 100% if the car is genuinely pool-only with no private use at all. If a business leases a car for an employee's personal use too, it usually counts as a taxable company car benefit, taxed via Benefit-in-Kind — as low as 4% for electric cars in 2026/27, up to 37% for the highest-emission combustion cars.
At a glance
| Factor | Personal (PCH) | Business (BCH) |
|---|---|---|
| Who leases it | An individual | A limited company, partnership or sole trader |
| VAT | Included in the headline price | 50% reclaimable (private use) or up to 100% (no private use) |
| Credit check | Personal credit history | Company financials (and sometimes a personal guarantee) |
| Tax if used privately by an employee | Not applicable | Benefit-in-Kind tax applies |
| Contract flexibility | Simpler, standard consumer protections apply | Can be more flexible on terms/mileage for fleets |
Personal Contract Hire (PCH)
PCH is the standard consumer lease: you sign in your own name, pay an initial rental plus fixed monthly payments including VAT, and hand the car back at the end within the agreed mileage. Because it's a regulated consumer credit agreement, you get the full protection of consumer credit law, including affordability checks based on your personal income and credit history. There's no restriction on private versus business use, since it's leased purely as a personal vehicle.
Business Contract Hire (BCH)
BCH works the same mechanically — fixed monthly rentals, hand back at the end — but the contract sits with a company, partnership or sole trader, and is assessed against the business's financials (sometimes with a personal guarantee required for smaller companies). The headline advertised price is usually shown excluding VAT, since VAT-registered businesses can reclaim a portion of it: 100% if the vehicle is used solely for business (a genuine pool car with no private use, which is a high bar to meet) or 50% of the VAT on the finance element if there's any private use at all, which covers the vast majority of real-world cases.
The tax catch: company car benefit
If a business leases a car and an employee (including a director) also uses it privately — commuting counts as private use — HMRC generally treats this as a company car benefit, taxed through Benefit-in-Kind (BIK) on the employee's payslip. This is where fuel type matters enormously: a fully electric company car sits at just 4% BIK for 2026/27 (rising gradually to a 9% cap by 2029/30), while petrol and diesel company cars range from roughly 17% up to 37% depending on emissions. This tax gap is why BCH combined with an EV, or a salary sacrifice EV scheme, has become one of the most common tax-efficient routes into a new car for company car drivers.
Which suits you
- Choose PCH if: you're leasing purely for personal use, want the simplicity of consumer protections, or you're self-employed without a limited company structure
- Choose BCH if: you run a VAT-registered limited company, the vehicle is genuinely business-critical, and you can benefit from reclaiming VAT — but be honest about private use, since BIK tax will usually apply if there's any
- Consider salary sacrifice if: you're an employee (including of your own company) wanting an EV specifically, since it stacks the low EV BIK rate with pre-tax salary deduction
Practical differences to check before signing
- Confirm whether the advertised price includes or excludes VAT — BCH prices are almost always shown excluding VAT, which can make like-for-like comparison with a PCH quote confusing
- Check the credit assessment route — a young or newly formed company may need a personal guarantee even on a business lease
- Get clarity from your accountant on exactly how much VAT you can reclaim based on your actual usage pattern
- If there's any private use, budget for the Benefit-in-Kind tax liability, which is deducted through PAYE
Don't assume a business lease is automatically cheaper just because the headline price excludes VAT — always compare on a like-for-like, VAT-inclusive basis, and factor in any Benefit-in-Kind tax if there's private use.
Frequently asked questions
What's the difference between PCH and BCH?
Can I reclaim all the VAT on a business car lease?
Do I pay tax if my company leases me a car?
Is business leasing only available to limited companies?
Which is cheaper, personal or business leasing?
Sources & further reading
- gov.uk — Expenses and benefits: company cars (BIK)
- gov.uk — Reclaiming VAT on cars
- British Vehicle Rental and Leasing Association (BVRLA)
Figures, prices and policy details were current at the last-updated date above. Automotive pricing, incentives and regulations change frequently — verify time-sensitive details with the linked primary sources. Read our editorial policy and fact-checking standards.
