The start of the new tax year has seen a number of changes with regard to capital allowances on business vehicles. Below are the major changes to keep you and your clients informed.
- To support the uptake of zero emission vehicles and ultra-low emission vehicles, the Government has extended the 100% first-year allowance (FYA) for cars with low carbon dioxide emissions for a further four years to 31 March 2025. The qualifying emissions threshold for this is reduced from 50 g/km to 0 g/km for expenditure incurred on or after 1 April 2021.
- In addition, the 100% FYA for zero-emission goods vehicles is extended for a further four years to 31 March 2025 for expenditure incurred by a person within the charge to corporation tax (5 April 2025 for expenditure for income tax).
- Furthermore, the main rate writing down allowance (WDA) of 18% applies to cars with emissions up to 50g/km for expenditure incurred on or after 1 April 2021 (6 April 2021 for income tax). The special rate WDA of 6% will apply to higher polluting cars with emissions above 50g/km.
- The new 50g/km threshold also applies in determining the 15% 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 2021 (6 April 2021 for income tax).
How can we help
Our Finance Bill Update course will cover the changes to capital allowances on business vehicles, as well as the other major clauses in the Finance Bill. The course will concentrate on the practical implications for accountants and their clients.