Capital Allowances allow your business to secure tax relief for certain capital expenditure. Qualifying expenditure on cars must usually be allocated to one of two general pools of expenditure. Which pool is appropriate depends on the car’s CO2 emissions.
Expenditure on cars with CO2 emissions over 110g/km will be dealt with in the special rate pool and attract a writing down allowance (WDA) of 6% p.a. This capital allowances rate was reduced in April 2019 from 8%.
Expenditure on cars with CO2 emissions from 50g/km up to and including 110g/km are dealt with in the main pool and attract a WDA of 18% p.a.
Cars that have an element of non-business use, by self-employed drivers, must be allocated to a single asset pool with a rate of either 18% or 6% (depending on the CO2 emissions) to enable the private use adjustment to be made.
First year allowances (FYA’s) are available for expenditure on new electric cars and cars with CO2 emissions up to 50g/km. This expenditure benefits from 100% capital allowances. The FYA’s that related to low CO2 emission cars was due to expire on 31 March 2018 but has now been extended until at least 31 March 2021.
There are different CO2 emission bands for cars bought from April 2015-April 2018, April 2013-April 2015 and April 2009-April 2013.