New capital allowances for cars
From April 2009, businesses obtain capital allowances for new expenditure on cars based on the car’s CO2 emissions and no longer on price. Before then, capital allowances for cars costing over £12,000 were limited to £3,000 a year.
Under the new rules, a car that emits no more than 160g/km will normally be a ‘main-rate car’ and qualify for the full 20% annual writing-down allowance, regardless of price. Cars emitting more than 160g/km qualify for 10% a year allowances only. Cars that are more than eight years old (those first registered before 1 March 2001) also qualify for the full 20% allowance, regardless of their emissions figure.
An equally crude and simple rule now applies to leased cars. In place of the previous formula scaling down the allowable rental deduction for cars costing above than £12,000, ‘main-rate cars’ qualify for full rental deductions, whereas for others, only 85% of the rental will be deductible.
The old rules continue to apply for a five-year transitional period to cars bought before 6 April 2009 (or 1 April 2009 for companies).