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Capital allowances

Capital allowances for cars – based on CO₂ emissions

First year allowance 1 Main pool Special rate pool
Period 2 Emissions
(g/km)
Allowance Emissions
(g/km)
Allowance Emissions
(g/km)
Allowance
2021 to 2025 0 100% 1 to 50 18% Above 50 6%
2019 to 2021 50 or below 100% 51 to 110 18% Above 110 6%
2018 to 2019 50 or below 100% 51 to 110 18% Above 110 8%
2015 to 2018 75 or below 100% 76 to 130 18% Above 130 8%
2013 to 2015 95 or below 100% 96 to 130 18% Above 130 8%
2012 to 2013 110 or below 100% 111 to 160 18% Above 160 8%
2009 to 2012 110 or below 100% 111 to 160 20% Above 160 10%
  1. Since April 2013 leasing companies cannot claim first year allowances for cars they buy to lease to customers.
  2. Each period runs from 1 April to 31 March.

Capital allowances available via the main or special rate pools are calculated on a reducing balance basis, but there is no longer any balancing allowance or charge on disposal, unless a car has been allocated to a single asset pool for a sole trader or partner because it is used partly for private purposes. Hence there will no longer be 100% recovery of tax relief on commercial depreciation over the life of a car on the fleet.

Capital allowances for vans

Until April 2025, a business that purchases a van with zero CO₂ emissions is eligible for a 100% first year allowance. Otherwise, vans should be treated as plant and machinery and allocated to the main pool, where they will be eligible for writing down allowances at 18%, unless an Annual Investment Allowance, Super-deduction, or Enhanced Capital Allowance is claimed.

Capital allowances for electric charge points

Until April 2023, any business that pays for the installation of an electric charge point at its workplaces is eligible for a 100% first year allowance, but any company that incurs expenditure on the installation of an electric charge point between 1 April 2021 and 31 March 2023 may claim a Super-deduction.

Annual Investment Allowance

From 1 January 2019 to 31 December 2021 most businesses may claim the annual investment allowance on expenditure on plant and machinery up to the maximum allowance of £1 million.

From 1 January 2022 the maximum allowance will reduce to £200,000.

Businesses may claim the allowance on both general and special rate plant and machinery. It is effectively a 100% allowance that applies to most qualifying expenditure up to the annual cap, with expenditure on cars being the most important exception. Commercial vehicles, such as vans, should qualify for the annual investment allowance.

Where qualifying expenditure exceeds the annual cap tax relief will be given under the normal capital allowance regime via the main or special rate pools, with writing down allowances being given at 18% or 6% respectively, on the reducing balance basis.

Super-deduction

A super-deduction will be available between 1 April 2021 and 31 March 2023 for companies investing in qualifying new plant and machinery. A 130% first year allowance will be available for main pool expenditure, such as vans and electric charge points, and a 50% first year allowance will be available for qualifying special rate expenditure.

When a qualifying main pool asset is subsequently sold, tax will be due on 130% of the sale price in the year of disposal. This clawback does not though apply to special rate expenditure.

A super-deduction will only be available on assets that are unused and not second hand, and they will not be available on the purchase of cars or to companies buying assets to lease.

Enhanced capital allowances in Freeports

An enhanced capital allowance of 100% will be available for companies investing in plant and machinery for use in Freeport tax sites in Great Britain, once designated. This will apply to both main and special rate assets, allowing firms to reduce their taxable profits by the full cost of the qualifying investment in the year it is made, and will remain available until 30 September 2026.