Capital allowances on cars

How do capital allowances work for cars?

GOV.UK says a business can claim capital allowances on cars it buys and uses in the business, which means deducting part of the car's value from its profits before tax. Writing down allowances are used to work out what can be claimed, unless the car qualifies for the 100% first-year allowance. ^[1]

Which rate applies depends on when the car was bought and its CO2 emissions. ^[1]

What counts as a car?

For capital allowances a car is a type of vehicle that is suitable for private use, which includes motorhomes, that most people use privately and that was not built for transporting goods. ^[1]

Motorcycles, lorries, vans and trucks do not count as cars. That means annual investment allowance and some first-year allowances can be claimed on them. Motorcycles bought before 6 April 2009 are the exception. ^[1]

Which rate applies to a car?

A business can claim one of the following. ^[1]

• the full value of the car as a 100% first-year allowance
• 14% of the car's value each year as a main rate allowance, or 18% before April 2026
• 6% of the car's value each year as a special rate allowance ^[1]

For cars bought from April 2021 the options are as follows. ^[1]

• New and unused, with CO2 emissions of 0g/km or an electric car: 100% first-year allowances.
• Second-hand electric car: main rate allowances.
• New or second-hand with CO2 emissions of 50g/km or less: main rate allowances.
• New or second-hand with CO2 emissions over 50g/km: special rate allowances. ^[1]

GOV.UK's page also lists the thresholds for cars bought in earlier periods, which are different. A car with no emissions figure uses the special rate, or the main rate if it was registered before 1 March 2001. ^[1]

The main and special rates apply from 1 April for businesses that pay Corporation Tax. The 100% first-year allowance applies from 1 April for all businesses. ^[1]

What changed to the main rate in 2026?

The main rate of writing down allowance changed from 18% to 14% on 1 April 2026 for Corporation Tax. If a company's accounting period includes that day, it has to work out a hybrid rate for the period. ^[2]

The special rate pool is 6%. It also holds integral features, items with a long life, solar panels, thermal insulation added to a building, and cars above the emissions threshold. ^[2] Solar panels have their own guide to claiming allowances on solar panels.

What do electric cars get?

A new and unused electric car, or one with zero CO2 emissions, can qualify for a 100% first-year allowance, which lets the business deduct the full cost from profits before tax. GOV.UK says this applies to electric and zero-emission cars bought before April 2027. It also applies to equipment for electric vehicle charging points bought before April 2027. ^[3]

A second-hand electric car does not qualify for the 100% allowance and goes into the main rate pool. ^[1]

Do cars qualify for the AIA or full expensing?

No. GOV.UK lists cars as not qualifying for the annual investment allowance, the super-deduction and 50% special rate first-year allowance, full expensing and the 50% first-year allowance, or the 40% first-year allowance. ^[1] Our guide explains what the annual investment allowance covers.

What about company cars used by directors and employees?

If the business provides a car for an employee or director, it can claim capital allowances on the full cost. It may need to tell HMRC that the car is a company benefit if the person uses it personally. ^[1]

An employee cannot claim capital allowances on a car they use for work, though they may be able to claim for business mileage and fuel costs. ^[1]

Can a company claim on a leased car?

GOV.UK says plant and machinery allowances cannot be claimed on things that are leased, unless there is a hire purchase contract or a long funding lease, because the business must own the item. ^[4]

How is the claim made?

A company claims on its Company Tax Return and includes a separate capital allowances calculation. If it uses writing down allowances, the amount depends on the pool the car is in. ^[5]

A specialist can check which pool each vehicle belongs in and whether a different treatment applies. For help with claiming capital allowances, a review could identify allowances your business may be entitled to.