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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
2018 to 2021 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 31 March 2021, 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.

Annual Investment Allowance

Most businesses may claim the annual investment allowance on expenditure on plant and machinery up to the maximum allowance of £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 8% respectively, on the reducing balance basis.