Capital allowances to be based on emissions of CO2 from April 2009

With effect from April 2009 the capital allowance treatment of all cars was reformed to favour those with low CO2 emissions.

As announced in the emergency Budget in June 2010, the rates of writing-down allowances (WDAs) for new and unrelieved plant and machinery will be reduced as follows:

From 20% to 18% per annum for expenditure allocated to the main rate pool. This will affect expenditure on cars emitting between 111g/km CO₂ and 160g/km CO₂ and for vans.

From 10% to 8% per annum for expenditure allocated to the special rate pool which includes cars emitting more than 160g/km CO₂.

This will effect the calculation of WDAs for chargeable periods ending on or after the 1st April 2012 for corporation tax (for incorporated businesses) and on or after 6th April 2012 for income tax (for the self employed).

The 100% first year allowance remains for cars emitting 111g/km CO₂ or less.

For further details see HMRC website.

As outlined in the March 2010 budget, zero-emission goods vehicles will be eligible for a 100% first year allowance. This will only apply to new and unused goods vehicles. This will apply for five years for expenditure on or after 1st April 2010 for corporation tax (for incorporated businesses) and on or after 6th April 2010 for income tax (for the self employed).

Last updated: June 2010

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