New announcement. Learn more

CHARTERED ACCOUNTANTS (ICAEW)

News and advice to help make your property business a success

LANDLORDS FINANCIAL BLOG

All

Landlords Tax Property Tax Landlords Tax Returns Landlords Accounts Property Tax Return Property Accounts Landlords Financial Tax Returns Tax Landlords Accountant Chartered Accountants Online Accountant Online Bookkeeping Online Tax Returns Your Online Accountant Your Online Bookkeeper Businessadvice Accounting VAT Cashflow Property Accountant Smallbusiness Businesstips Capital Gains Tax Dividends Expenses Ihtexemptions Inheritance Tax Property SDLT Taxplanning Cgt Furnished Holiday Lettings HMRC Income Tax Investment Property Tax NIC PAYE Pension Property bookkeeper Taxreturn Allowable Business Expenses Annual Exempt Amount Business Expenses Business Rate Capital Allowances Capital Gains Capital gains tax property Cashbasis Compliance Deductibleexpenses Disincorporation Employment Allowance FHLs Finance Financialmanagement Gifts HMRC complaints Holiday Lets Tax Lettings Making Tax Digital MakingTaxDigital Mileage Allowance Mobilephones National Insurance Overlaprelief Partnership Partnershipbusinesses Ppr Property Company Tax Property Tax Deductible Expenses Propertyallowance Reimbursedexpenses Rent a Room Relief Residence Relief Small Business Tax free income Tax Relief TimetoPay VAT invoice 60 day capital gains limit Abolitionclass2 Accrualsbasis Acquisitions Advisoryfuelrates AI AirBnB Alphabet shares Amap Annual Tax on Enveloped Dwellings Appeal Artificial intelligence Assessment Asset disposal Associated Company Associated Company Tax Rules Autumnstatement Bad Debt Bad Debt Tax Relief Baddebts Badgesoftrade Beancounter Benefits in Kind Breakeven Point Budget Business advice Business asset deferment Business coach Business Continuity Business Entertainment Business Rates Business Rates Relief Business tips Businessgrowth Businesstypes Buy or Lease Equipment Buytolet Capital Allowances for Cars Capital Gain Capitalallowances Capitalexpenditure Car Capital Allowances Carry Back Losses Change of Tax Basis ChatGPT Child Benefit CIS Scheme Common Tenant Companies Expenditure Companies House Company Account Deadlines Company Account Filing Company Strike Off Company Tax Efficient Property Companyassociation Companyloanstaxfree Compulsory Strike Off Construction Industry Scheme Contacthmrc Contentmarketing Contributions Corporation Tax Losses Corporation Tax New Regime Corporation Tax Rates CorporationTax Costs Cryptocurrency Customerlistimplications Deductible Business Expenses Deductions Demerger Depreciation Development Directors Directors Loans Directorsloans Disallowable Business Expenses Discovery Dividend allowance Dividend Allowance Reduction Dividend Planning Dividendallowance DLA Domestic Items Tax Relief Dormantcompany EIS Employee Discount Employee management Employeecompensationpayments EmployeeOwnershipTrust Endoflifeplanning Enquiry EnterpriseResourcePlanning Entertainment Entrepreneurmindset Equity Expenses Allowed For Tax Extrabenefit Eyetests Flipping Furnished Holiday Lets Tax Gift Aid Gift Allowance Growthhacks Help to pay tax bills HICBC HMO Licensing Fees Holdoverrelief Holiday Lettings Tax How to apply for a Business Loan How to Extract Profit Humour Hybrid Illegaldividends Income Inflationary Gains Influencers Inheritance Tax Nil Rate Band Interest Rates Interestrelief Interestrestriction ISA Joint Tenant Keypersoninsurance Landlord Repairs Landlords Self Assessment Late vat registration LBTT Leadgeneration Leadmagnet Leanbusinessmodel Letting Agent Disbursements Letting Agent Recharres Lettings Relief Limitedcompany Liquidation Demerger Loaninterest Long Lets Tax Longservice LTT Mainresidencerelief Managed Lets Management accounting Maritalhomedivorce Marriage allowance Marriageallowance Mileage payment Minimumwage Mixedusesdlt Mortgage costs Mortgage Interest Relief New property Newcompanycarfuelrates Newnicrules NIC 2023 to 2024 NIC savings Nicdisregard Nicreduction NMW Nmwerrors Non Allowable Business Expenses Non-taxable Nudgeletter Optiontotaxvat Overpayment Relief Paperform Parttime Patternofoccupancy PAYE by Direct Debit Payrolling Penaltypoints Pension Payments Tax Relief Pensioncontributions Pensions Performance-reviews Periodofgrace Periodsofabsence Personal Expenses Personal finance Personalallowance Personalguarantees Postcessationrelief Pretradingexpenses Profit Profit-and-loss ProfitAndLoss Property Allowance Property Development Company Property Incorporation Property Investment Company Property investor accounts Property investor tax tips Property Letting Property Rental Business Property Trading Propertycompany Recharges by Estate Agents Regularpayments Relief Rent your drive Rental Rentaroom Research & Devolopment Residential property gains Residentialsdlt Retail stock control Retainedprofits Revenue Room for rent tax Rti SA Salary Savings SDLT changes Section 455 Tax Section455tax Selective Licences Landlords Self Assessment Self-employednic Selfemployed Selling Online Seperation Servicecharges Settlementslegislation Simplified Expenses Smallbiz Smallbusinessraterelief Software Sole Trader Spring Budget Staffparties Stamp duty SuccessJourney Tax Allowance on Driveways Tax Allowances Tax Break Tax Codes Tax Deadlines Tax Deductions Tax Filing Deadlines Tax Free Childcare Tax on Company Vans Tax position Tax tips for landlords Taxbillpayments Taxconsequences Taxincentives Taxposition Taxpositionassets Taxrelief Taxreliefs Taxses Terminationpayments Tips Trade professional Training Transfer Assets Transfer Assets Between Spouses Umbrellacompany Undisclosedincome Unpaid Rent VAT Bad Debt Relief VAT Deadlines VAT Disbursements VAT Penalties VAT registration VAT Reverse Charge Vatpenalties Vatregistered Vatregistrationthreshold Wellbeing Working from home

TAGS

Capital allowances for cars

August 16, 2022

Capital allowances are a mechanism for providing tax relief for capital expenditure.

Relief is generally given in the form of a writing down allowance, although a first year allowance is available for expenditure on new and unused zero-emission cars. Expenditure on cars does not qualify for the annual investment allowance or for the time-limited super-deduction or 50% first-year allowance available to companies. Capital allowances cannot be claimed where the simplified expenses system is used to pay mileage allowances.

Capital allowances for cars can be claimed by both unincorporated businesses and companies. They can also be claimed where the cash basis is used as expenditure on cars cannot be deducted under the cash basis capital expenditure rules.

First-year allowance

A 100% first-year allowance is available for expenditure on new and unused zero-emission cars. This means that the cost can be deducted in full in computing taxable profits in the period in which the expenditure is incurred.

The first-year allowance is only available for new cars; second-hand zero-emission cars only qualify for a writing down allowance.

A balancing charge, equal to the sale proceeds, will arise if the car is sold.

Writing down allowances

There are two rates of writing down allowance – the main rate and the special rate. The available rate depends on the car’s CO2 emissions and the date on which the expenditure was incurred.

New and used cars purchased on or after 6 April 2021 which have CO2 emissions of 50g/km or less (other than new electric cars qualifying for a 100% first-year allowance) are added to the main rate pool and receive main rate allowances at the rate of 18% on a reducing balance basis.

Cars purchased on or after 6 April 2021 with CO2 emissions in excess of 50g/km must be added to the special rate pool. They attract special rate writing down allowances of 6% on a reducing balance basis.

If the car is sold, the sale proceeds must be added to the relevant pool. This ensures that capital allowances are given for the difference between the cost and the proceeds over the life of the car.

Private use

If a sole trader or partner uses a car partly for business and partly for private use, capital allowances are proportionately reduced to reflect the private use. Cars used for business and private use have their own pool rather than being added to the main rate or special rate pool.

Employees

Employees are not able to claim capital allowances for cars, even if they use them for business. The approved mileage rates (which may be paid tax-free up to the approved amount) provide an element to cover depreciation.

Capital Allowances

Car Capital Allowances

Tax Allowances

Capital Allowances for Cars