Businesses can claim Capital Allowances tax relief for certain types of capital expenditure. For expenditure on plant and machinery that exceeds the Annual Investment Allowance (AIA) and does not qualify for a first year allowance, a standard 18% Writing Down Allowance (WDA) is available. This is based on the cost of the items in the year they are acquired.

There is a lower rate known as the Special Writing Down Allowance available for certain long life assets, integral features and certain motor vehicles. The special rate of Writing Down Allowance is being reduced from 8% to 6% from April 2019. This reduction has been put in place to align tax depreciation with commercial depreciation rates and to align with the new Structures and Buildings Allowance.

Qualifying expenditure on cars must be allocated to one of two general P&M pools of expenditure. Which pool is appropriate depends on the car’s CO2 emissions. Expenditure on cars with CO2 emissions over 110g/km driven is dealt with in the special rate pool and attracts a WDA of 8% p.a (reducing to 6% in 2019-20). Expenditure on cars with CO2 emissions from 50g/km up to and including 110g/km driven, is dealt with in the main pool and attracts a WDA of 18% p.a. Cars with CO2 emissions up to 50g/km benefit from 100% first year Capital Allowance.