Payroll Legislation

Capital Allowances: Extension of First Year Allowances

Legislation

Capital Allowances: Extension of First Year Allowances

Due Date

April 2021

Summary

First year allowance (FYA) rules for business expenditure on business cars, zero emission goods vehicles and equipment for gas refuelling stations are being extended from April 2021 until April 2025. This also reduces the CO2 emission thresholds which are used to determine the rate of capital allowances available for business cars.

From April 2021:

  • For the FYA for zero emission goods vehicles, the legislation will take effect from 1 April 2021 for businesses chargeable to corporation tax. For businesses chargeable to income tax, it will take effect from 6 April 2021.
  • For the reduction to business cars CO2 emission thresholds together with the FYAs for low CO2 emission cars and equipment for gas refuelling stations, the legislation will take effect from 1 April 2021.

Business cars:

  • The 100% FYA will only be available for the purchase of new electric cars or cars which have zero CO2 emissions
  • Writing Down Allowance (WDA) at the main rate (18%) will only be available for cars with CO2 emissions not exceeding 50g/km
  • WDAs at the special rate (6%) will be available for cars with CO2 emissions exceeding 50g/km.
  • There is no change for businesses with expenditure on zero emission goods vehicles and equipment for gas refuelling stations.

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