The government has confirmed that the period for which the 100% first year allowances (FYAs) are available is to be extended from April 2021 to April 2025. In tandem with this announcement, there is also a significant reduction in the CO2 emission thresholds which are used to determine the rate of capital allowances available for business cars.
This means that the 100% writing down allowance (WDA) will only be retained for zero emission vehicles (ZEVs). The threshold will be reduced from 50g/km to 0g/km. The measure is designed to incentivise the uptake of zero CO2 emission vehicles. The main rate WDA of 18% will apply to other cars with emissions up to 50g/km (was up to 110g/km). The special rate WDA of 6% will apply to higher polluting cars with emissions above 50g/km.
The FYA allows companies to set the full cost of qualifying cars against their tax bills in the year the cars were purchased. The FYA is only available on the purchase of new cars, second-hand cars do not qualify for FYAs (but can claim WDAs). If claiming the full amount of FYA would create a loss, it is also possible to claim less than the full 100% FYA and claim the balance using writing down allowances.
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