Personal, Business, and Trust Tax Support

Capital Allowances for business cars in Personal Tax

Summary of capital allowances for car purchases

HMRC gives the following summary of capital allowances for businesses' expenditure on cars in its Policy paper of 11 March 2020:
Capital allowances allow businesses to write down their qualifying capital expenditure on plant or machinery against their taxable income. Where 100% FYAs are available, the entire expenditure can be written down against taxable income in the tax period in which the expenditure is incurred. Otherwise the expenditure is allocated to a pool, which would be eligible for a writing down allowance (WDA) for the tax period in which the expenditure is incurred and succeeding tax periods on a reducing balance basis against taxable income at either the main rate or the (lower) special rate. The capital allowance you can claim will depend on when the car was purchased and its Carbon Dioxide emissions.[Capital Allowances: CO2 emission thresholds for business cars and first year allowances for business cars, zero-emission goods vehicles and equipment for gas refuelling stations]

Cars bought from April 2021

  • New and unused car with zero emissions:
    • use
      Zero Emission Car Allowance
       in Digita Personal, Business, and Trust Tax for the First Year capital allowance of 100%
    • use
      Low CO2 Emissions Cars
       in Corporation Tax for the First Year capital allowance of 100%
  • New or second-hand cars with emissions between 1g/km and 50g/km: use
    Main Pool
    .
  • New or second-hand cars with emissions above 50g/km: use
    Special Rate Pool
    .

Cars bought from April 2018

  • New and unused cars with emissions of 50g/km or: use
    Low CO2 Pool
    .
  • New and unused cars with emissions between 50g/km and 110g/km: use
    Main Pool
    .
  • Second-hand cars with emissions of 110g/km or less: use
    Main Pool
    .
  • New or second-hand cars with emissions above 110g/km: use
    Special Rate Pool
    .

Cars bought from 1 April 2009

  • Assessed according to the car's emissions.
  • Allowances are unrestricted.
  • Main Rates and Special Rates apply from 1 April for limited companies.
  • Main Rates and Special Rates apply from 6 April for sole traders and partners.
  • First Year Allowances apply from 1 April for all businesses.

Cars bought before 1 April 2009

  • Assessed according to whether they are Expensive (cost more than £12,000) or Inexpensive.
  • Allowances are restricted to £3,000 on Expensive cars.
  • Expensive cars can be added to the
    Expensive Car Pool
     to deal with earlier years, but will be transferred to the
    Main Pool
     with effect from April 2014.

This article applies to:

  • Product: Digita Personal Business and Trust Tax