Should your next business car be electric?

The government is altering the CO2 emissions threshold for capital allowances to encourage the use of electric cars.

Here’s what you need to know

The government has been tweaking the capital allowances regime to support its strategy to end sales of new petrol, diesel and hybrid vehicles by 2035. Therefore, from April 2021, the 100% first year allowance (FYA) will only be available for the purchase of new electric cars or cars which have zero CO2 emissions.

The writing down allowance (WDA) at the main rate (18%) will only be available for cars with CO2 emissions not exceeding 50g/km instead of 110g/km.

WDAs at the special rate (6%) will apply to cars with CO2 emissions exceeding 50g/km (currently 110g/km).

HMRC has also confirmed that the FYA rules for expenditure on business cars, zero emission goods vehicles and equipment for gas refuelling stations, are being extended from April 2021 until April 2025.

For further information on changes that have been made to company and fuel benefits, read our article, Company car tax changes 2020/21.