100% first year allowances are currently available on brand new cars where emissions do not exceed 50g/km. This 100% allowance is being extended to April 2021.
From April 2021, the 100% first year allowance will only apply to zero emission cars.
Currently, vehicles emitting between 50-110g/km are eligible for 18% writing down allowances, with so called “high emission” vehicles emitting over 110g/km only eligible for 6% writing down allowance. These rates will remain in place until April 2021.
From April 2021 however, vehicles with emissions between 1-50g/km will be eligible for the 18% writing down allowance and vehicles will be treated as “high emission” if their emissions exceed 50g/km, and in which case they will only be eligible for the 6% writing down allowance.
As recently as a couple of years ago, a vehicle emitting 75g/km would have qualified as an ultra-low emission vehicle and therefore been eligible for a 100% first year allowance, but from April 2021 the allowances available in this instance will reduce to 6%!
If you are looking to buy a low emission car for a business that is not necessarily fully electric (and therefore zero-emission), you may wish to look to do this prior to April 2021.
For the avoidance of doubt, vehicles qualifying as vans still qualify for annual investment allowance (AIA) allowing you to claim 100% tax relief in the year of purchase if you have sufficient AIA available.
Claiming Capital Allowance
Business cars
You can claim capital allowances on cars you buy and use in your business. This means you can deduct part of the value from your profits before you pay tax.
Employees
If you’re an employee you cannot claim capital allowances for cars, motorbikes and bicycles you use for work, but you may be able to claim for business mileage and fuel costs.
What counts as a car
For capital allowances, a car is a type of vehicle that:
· is suitable for private use - this includes motorhomes
· most people use privately
· was not built for transporting goods
What does not count
Because they do not count as cars you can claim AIA on:
· motorcycles - apart from those bought before 6 April 2009
· lorries, vans and trucks
Rates for cars
The rate you can claim depends on the CO2 emissions of your car and the date you bought it.
The main and special rates apply from 1 April for limited companies, and 6 April for sole traders and partners. The first year allowances rate applies from 1 April for all businesses.
Source: Gov.UK & Doddaccountants