Company Car Tax

Tax Allowances for Company Cars

Acquisition of business cars

Purchase

 

Leasing

  • Companies purchasing cars with emissions of up to 50g/km are able to write down the full cost of these vehicles against their taxable profits in the first year of ownership
  • Companies purchasing cars with emissions between 51g/km and 110g/km must allocate the expenditure to the general plant and machinery pool - where they will be able to write down 18% of the cost of these vehicles against their taxable profits each year, on a reducing balance basis.
  • Companies purchasing cars with emissions of 111g/km and above must allocate the expenditure to a 'special rate' plant and machinery pool - where they will be able to write down only 6% of the cost of these vehicles against their taxable profits each year, on a reducing balance basis.
 
  • The percentage of leasing and contract hire payments that are allowable against a companies profits have improved considerably since the changes introduced in April 2009.
  • Quite simply for cars with CO2 emissions of less than 111g/km 100% of the rentals are allowable.
  • For cars with CO2 emissions of 111g/km or above, 85% of the rentals can be deducted from a companies taxable profit.
  • "From a purely financial standpoint it looks as if leasing could become the dominant method of funding for most cars" Dan Rees, Business Car Consultant, Deloitte & Touche

Tax Allowances - Commercial Vehicles

Purchase

 

Leasing

  • The allowances when purchasing commercial vehicles (CV) are much more straightforward than those for cars.
  • Irrespective of the price or CO2's of the CV they are placed in the general plant and machinery pool and written down at 18% per annum on a reducing balance basis. In other words in the first year 18% of the price paid for the CV is allowable against profits
  • It is worth noting that there is an annual investment allowance (AIA) for the first £1 millon of a company's expenditure on plant and machinery each year. This is a temporary increase to the allowance, which is usually much lower, from 1 January 2019 to 31 December 2020.
 
  • 100% of the leasing/contract hire rentals of a CV are allowable against profits regardless of price or CO2's of the vehicle