Cars do not qualify for the annual investment allowance. However, it is possible to obtain full relief for expenditure on a car in the year of purchase if you buy a low emission car that qualifies for a first year allowance (FYA) of 100%.
If the expenditure is incurred between 1 April 2015 and 31 March 2018, the FYA is available for cars with CO2 emissions of up to 75g/km. Expenditure on cars with CO2 emissions in excess of 75g/km do not qualify for a FYA, only the writing down allowance.
Example:
Gabby is a sole trader and prepares accounts to 31 March each year.
She wishes to buy a new car which she will use solely for business purposes. She buys a car in May 2015.
She chooses one with CO2 emissions of 70g/km. The car costs £10,000.
As the CO2 emissions are less than 75g/km she can claim the FYA and write off the full cost of the car against her profits of the year to 31 March 2016.
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