If your business buys a car, you won’t usually get tax relief upfront. Instead, most businesses claim relief gradually through writing down allowances (WDAs) — and understanding how they work can make a real difference to your tax position.
Why cars are treated differently
Unlike most equipment, cars don’t qualify for the Annual Investment Allowance (AIA) or full expensing.
This means:
- You typically can’t deduct the full cost in year one
- Relief is spread over several years instead
There is one key exception — but for most cars, writing down allowances will apply.
How writing down allowances work
Writing down allowances let you deduct a percentage of the car’s value each year from your profits before tax.
Cars are placed into one of two pools:
Main rate pool (lower emissions)
- 18% per year (for 2025/26)
- Applies to cars with lower CO₂ emissions (typically 50g/km or less)
Special rate pool (higher emissions)
- 6% per year
- Applies to cars with higher CO₂ emissions
The rate you claim depends entirely on the car’s emissions — so this is a key decision point when purchasing.
The 100% allowance exception
If you buy a new, fully electric car, you may qualify for:
- 100% first-year allowance
- Full tax relief in the year of purchase
However:
- It must be new (not second-hand)
- It must have zero CO₂ emissions
This is currently one of the most valuable tax reliefs available on vehicles.
A simple example
If your business buys a petrol car with higher emissions:
- It goes into the 6% pool
- You claim 6% of the value each year
- The remaining balance carries forward and continues to be written down
This spreads the tax relief over many years — which is why choosing the right type of vehicle matters.
Don’t overlook private use
If the car is used for both business and personal journeys:
- You must restrict your claim to the business portion only
- The private element is not tax deductible
Good record-keeping is essential here.
Get the full picture on capital allowances
Car rules are just one part of a much bigger capital allowances landscape. For a complete, practical guide:
Capital Allowances: Maximising Relief Claims
Understand all allowances, optimise claims, and avoid common tax pitfalls.
Final thought
Writing down allowances aren’t complicated once you understand the structure — but they do require careful planning. Get it right, and you’ll ensure you’re claiming every pound of relief your business is entitled to.
