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First-year allowances: cars

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The Capital Allowances Act 2001 (Car Emissions) (Extension of First-year Allowances) (Amendment) Order, SI 2021/120, extends the 100% first-year allowances for low-emission cars, zero-emission goods vehicles and equipment for gas refuelling stations for vehicles by four years, to March/April 2025.

For low-emission cars, the CO2 emissions threshold is reduced from 50g/km to 0g/km for expenditure incurred on or after 1 April 2021 (effectively restricting the FYA to zero-emission cars).

The Order also reduces the emissions limit from 110g/km to 50g/km for the 18% main-rate writing-down allowance for cars, for expenditure incurred on or after 1 April 2021 (corporation tax) or 6 April 2021 (income tax), meaning that more cars will now fall into the 6% special rate pool. The reduced threshold also applies for determining the lease rental restriction for costs of hiring business cars for more than 45 consecutive days, in relation to contracts entered into on or after 1 April/6 April 2021. Rental contracts entered into before that date are expressly excluded, so that the previous 110g/km threshold continues to apply, avoiding disruption for businesses which had already committed to existing leases.

Issue: 1519
Categories: News