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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
Allowance Emissions
Allowance Emissions
2021 to 2025 3 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.
  3. The Chancellor announced in the Budget on 11 March 2020 that first year allowances for zero emission cars would be extended to 2025, but that the thresholds for the main and special rate pools would be reduced accordingly.

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 provided the business does not claim the government’s Plug-In Van Grant.

Any other van should be treated as plant and machinery and allocated to the main pool, where it will be eligible for writing down allowances at 18%, unless an Annual Investment Allowance is claimed.

Capital allowances for electric charge points

Until April 2023, a business that pays for the installation of an electric charge point at its workplaces is eligible for a 100% first year allowance.

Annual Investment Allowance

From 1 January 2019 to 31 December 2020 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 2021 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.