Capital-allowance-on-business-cars
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YOU can claim capital allowances when you buy assets that you keep to use in your business, for example:

  • equipment
  • machinery
  • business vehicles – cars, vans or lorries

You can deduct some or all of the value of the item from your profits before you pay tax.

If you’re a sole trader or partner and have an income of £150,000 or less a year, you may be able to use a simpler system called cash basis instead.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value, amount you’d expect to sell it for, instead if:

  • you owned it before you started using it in your business
  • it was a gift

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.

Use writing down allowances to work out what you can claim – cars do not qualify for annual investment allowance (AIA).

Sole traders and partners

If you’re a sole trader or a partner you can claim simplified mileage expenses on business vehicles instead – as long as you have not already claimed for them in another way.

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.

Because they do not count as cars you can claim annual investment allowance 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.

Cars bought from April 2018

Description of carWhat you can claim
New and unused, CO2 emissions are 50g/km or less (or car is electric)First year allowances
New and unused, CO2 emissions are between 50g/km and 110g/kmMain rate allowances
Second hand, CO2 emissions are 110g/km or less (or car is electric)Main rate allowances
New or second hand, CO2 emissions are above 110g/kmSpecial rate allowances

Cars bought between April 2015 and April 2018

Description of carWhat you can claim
New and unused, CO2 emissions are 75g/km or less (or car is electric)First year allowances
New and unused, CO2 emissions are between 75g/km and 130g/kmMain rate allowances
Second hand, CO2 emissions are 130g/km or less (or car is electric)Main rate allowances
New or second hand, CO2 emissions are above 130g/kmSpecial rate allowances

Cars bought between April 2013 and April 2015

Description of carWhat you can claim
New and unused, CO2 emissions are 95g/km or less (or car is electric)First year allowances
New and unused, CO2 emissions are between 95g/km and 130g/kmMain rate allowances
Second hand, CO2 emissions are 130g/km or less (or car is electric)Main rate allowances
New or second hand, CO2 emissions are above 130g/kmSpecial rate allowances

Cars bought between April 2009 and April 2013

Description of carWhat you can claim
New and unused, CO2 emissions are 110g/km or less (or car is electric)First year allowances
New and unused, CO2 emissions are between 110g/km and 160g/kmMain rate allowances
Second hand, CO2 emissions are 160g/km or less (or car is electric)Main rate allowances
New or second hand, CO2 emissions above 160g/kmSpecial rate allowances

Move the balance of any cars bought before April 2009 to your main rate allowances pool.

If your car does not have an emissions figure use the special rate – use the main rate if it was registered before 1 March 2001.

Using cars outside your business

If you’re a sole trader or partner and you also use your car outside your business, calculate how much you can claim based on the amount of business use.

If your business provides a car for an employee or director you can claim capital allowances on the full cost. You may need to report it as a benefit if they use it personally.

How to claim

When you’ve worked out your capital allowance, you can claim on your:

  • Self assessment tax return if you’re a sole trader
  • Partnership tax return
  • Company tax if you’re a limited company – you must include a separate capital allowances calculation

Employees must claim in a different way.

The amount you can claim is deducted from your profits.

When you can claim

You must claim in the accounting period you bought the item if you want to claim the full value under your annual investment allowance or first year allowances

If you do not want to claim the full value you can claim part of it using writing down allowances. You can do this at any time as long as you still own the item.


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