Budget 2016: Capital allowances on business cars

A 100% first year allowance (FYA) is available on low emission cars for expenditure incurred up to 31 March 2018. The relief applies to cars with a CO2 emissions of 75g/km or less.

The main rate of capital allowances of 18% applies to cars with a CO2 emissions of between 75g/km and 130g/km.

The 100% FYA for businesses purchasing low emission cars will be extended for a further three years to April 2021.

From April 2018 the carbon dioxide emission threshold below which cars are eligible for the FYA will be reduced from 75 grams/kilometre to 50 grams/kilometre.

From April 2018, the government will reduce the carbon dioxide emission threshold for the main rate of capital allowances for business cars from 130 grams/kilometre to 110 grams/kilometre.

The government will review the case for the FYA and the appropriate business cars emission thresholds from 2021 at Budget 2019.

The changes in the thresholds are in anticipation of more efficient cars being developed in the next few years.