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% |
- Since April 2013 leasing companies cannot claim first year allowances for cars they buy to lease to customers.
- 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 new and unused van with zero CO₂ emissions is eligible for a 100% first year allowance.
Under the ‘full expensing’ regime, a company that purchases any new and unused van will be eligible for a 100% first year allowance, but on disposal 100% of the sales proceeds must be added to the company’s taxable profits.
For other businesses, such as sole traders and partnerships, 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 or Enhanced Capital Allowance is claimed.
Capital allowances for electric charge points
Until April 2025 any 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
Most businesses may claim the annual investment allowance on expenditure on plant and machinery. From April 2023 the maximum allowance available has been permanently set at £1 million.
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.
Enhanced capital allowances in Freeports
An enhanced capital allowance of 100% is available for companies investing in plant and machinery for use in designated Freeports and Investment Zones. 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.