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What are the capital allowances on company cars?

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3 December 2014

capital allowances
There are still savings to be made but you will need to do your research more than ever

SUCCESSIVE governments have been encouraging companies to run greener cars by giving larger tax breaks for cleaner models.

But the rules on capital allowances are tightening up in a bid to make the UK ever more pollution free.

Now businesses buying company cars really do need to do their homework on emissions before placing an order – or in the long term it will cost them dear.

So what are the tax breaks that are available if you buy, rather than leasing your vehicles?

Writing Down Allowance
Writing down allowances (WDAs) on cars are available to any business carrying out a trade and incurring capital expenditure. The car must, however, be used for the purpose of that trade.

Currently the tax breaks for company car Writing Down Allowances fall into three categories. These are:

Maximum capital allowance
Up to 95g/km CO2 (100% First Year Allowance);

Mid range capital allowance
96g/km CO2 to 130g/km (18% on a reducing balance basis)

Minimum capital allowance
131g/km CO2 and above (8% on a reducing balance basis)

 

Honda Civic
The Honda Civic was winner of our Best SME Company Car to Buy award and also qualifies for first year writing down allowance

First Year Allowances

These have been used by the government to persuade companies to opt for low-emission or better still, zero emission electric cars.

The levels of emissions above which these allowances will not be available has, however, been reducing.

For 2014-15 the figure is 95g/km; but for the following 2015/16 year it will drop to 75g/km. It will stay at 75g/km for 2016/17 and 2017/18.

If a business doesn’t have enough profits against which to offset this allowance it can be transferred to the main capital allowance pool where it will attract writing down allowances at 18% p.a.

* You can find a car’s CO2 emissions on its V5C certificate or at www.carfueldata.dft.gov.uk.

 

 

 

 

 

 

 

 

 

Cars go into the main plant and machinery capital allowance ‘pool’, rather than being accounted for as individual assets. Therefore the purchase prices of all cars and most other plant and machinery are accounted for together, with a standard 18% writing down allowance being calculated on the total balance that is in the pool at the year-end.

Cars emitting over 130g/km go into a separate pool and attract an 8% writing down allowance.

 

 

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