Capital Allowances for Company Cars and Vans
Capital Allowances for Company Cars and Vans – 2026/27
If you are operating company vehicles dependent on the funding method you use, you may be able to obtain tax relief on your vehicle purchase.
Questions you may ask:
- Can I reclaim my car purchase cost via a capital allowance for car?
- What are the restrictions on obtaining tax relief on purchasing vehicles for my business?
How does it work?
Capital Allowances For Cars
Capital Allowances for cars is dependant upon the CO2 of the car and the period in which the car was purchased.
Co2 Emissions | 0 g/km * | 1-50 g/km | 51-110 g/km | 111 g/km and above |
|---|---|---|---|---|
Year | Writing Down Allowance (WDA) | Writing Down Allowance (WDA) | Writing Down Allowance (WDA) | Writing Down Allowance (WDA) |
2026/27 | 100% | 14% | 6% | 6% |
2025/26 | 100% | 18% | 6% | 6% |
2024/25 | 100% | 18% | 6% | 6% |
2023/24 | 100% | 18% | 6% | 6% |
2022/23 | 100% | 18% | 6% | 6% |
2021/22 | 100% | 18% | 6% | 6% |
2020/21 | 100% | 100% | 18% | 6% |
2019/20 | 100% | 100% | 18% | 6% |
2018/19 | 100% | 100% | 18% | 6% |
* Note : The allowance only applies to a new and unused zero-emission car. A second-hand electric car enters the main pool.
Who Claims the Allowance?
- Outright purchase: purchasing business normally claims.
- Hire purchase: the user will normally claim capital allowances on the qualifying capital cost, excluding interest.
- Contract hire/operating lease: the leasing company normally claims; the customer instead deducts qualifying rentals, subject to the lease rental restriction where applicable.
- Contract purchase: treatment depends on the contractual terms and tax ownership.
Notes:
From April 2009 balancing allowances or charges on the disposal of vehicles were abolished meaning that 100% recovery of tax relief on depreciation over the life of the car on the fleet is no longer available.
Capital Allowance for cars which are available via the main or special pools are calculated on a reducing balance basis ( i.e. the applicable percentage multiplied by the pool balance), at the point of disposing of the car a final balancing allowance or charge is no longer available. This now means that 100% tax relief on a car relating to its depreciation is now not achievable.
Leasing companies have not been eligible to claim FYAs on cars purchased to lease to clients since April 2013.
Businesses acquiring new and unused electric charge points are able to claim a 100% first year allowance (FYA). This measure was due to cease on 31 March 2023 but has been extended. Qualifying new and unused EV chargepoint equipment can receive a 100% first-year allowance until:
- 31 March 2027 for Corporation Tax
- 5 April 2027 for Income Tax
LetsTalkFleet can provide independent impartial advice on Fleet vehicle Capital Allowances for your business so please get in touch with any specific enquiries you have, we are available on 0330 056 3335 or via email [email protected] .
The information provided is based on existing and proposed legislation as at 26th August 2026. Whilst every effort has been made to ensure that information given is accurate and not misleading, this information is intended to provide a quick reference to the current tax regulations relating to company vehicles and how they impact employers and employees. The content has been provided for informational purposes only and should not be relied on as a substitute for professional advice. No responsibility can be accepted by LetsTalkFleet Ltd for any loss or liability occasioned by any person acting on or refraining from action as a result of viewing this information.
Capital Allowances For Vans
The current position can be summarised as:
- Vans are normally plant and machinery rather than cars.
- Most businesses can claim 100% AIA, subject to the £1 million limit.
- Companies may alternatively qualify for full expensing on eligible new and unused vans.
- A permanent 40% first-year allowance was introduced for qualifying new main-rate expenditure from 1 January 2026. Cars are excluded, but qualifying vans can be included where the conditions are met.
- Otherwise, the main-pool WDA is 14%.
Historical Data
Period | First Year Allowance | Main Pool (Plant and Machinery) * | ||
|---|---|---|---|---|
CO₂ emissions | Writing Down Allowance (WDA) | CO₂ emissions | Writing Down Allowance (WDA) | |
up to 31 March 2025 | 0g/km | 100% | 1g/km or greater | 18% |
* Subject to the business not claiming the Annual Investment Allowance
Annual Investment Allowance (AIA) - HMRC Guide
The Annual Investment Allowance (AIA) is a 100% writing-down allowance, whose limit is £1,000,000. This can be used for purchase based funding types including Contract Purchase for vans but not cars.
The majority of businesses should be able to claim the AIA on expenditure on plant and machinery and purchases relating to commercial vehicles should qualify, however it should be noted that cars are an exception and cannot be included.
This can be used for purchase based funding types including Contract Purchase for vans.