If you have purchased a vehicle for business purposes then you may be eligible to claim the costs back in the form of capital allowances. You can gain capital allowances on cars you buy and use in your business and if you’re self-employed. This means that you can deduct part of the value from your profits before you pay tax. You can use a writing-down allowance to work out what you are entitled to claim. It is important to note that cars do not qualify for an annual investment allowance.

Sole Traders & Partnerships

You can claim mileage expenses on any vehicles used for business purposes if you’re a sole trader or a partnership that has no company partners. You cannot claim mileage allowance if you have already claimed for the vehicle in another way.


If you’re an employee you cannot claim capital allowances for vans, cars, motorbikes, or bicycles that you use for work, but you might be eligible to claim for business mileage expenses and fuel costs.

How Are Capital Allowances For Cars Defined?

For capital allowances claims, cars are defined as a type of vehicle that is suitable for private use, that most people use privately, and that was not built for the transportation of goods.

Because they do not count as cars you can claim an annual investment allowance on motorcycles (If bought after April 2009), lorries, vans and trucks.

Rates Of Capital Allowance For Cars

The rates of capital allowances for cars is as follows, you can claim:

Which type of rate you can claim depends on the date you purchased the vehicle and its Co2 emissions. If your car doesn’t not have an emissions figure then you can use the special rate allowance or you can use the main rate allowance only if it was registered before 1st March 2021.

Main and special rate writing down allowances apply from 1st April for businesses that pay corporation tax and 6th April for businesses that pay income tax. The 100% first-year allowance rate applies from 1st April for all businesses.

Capital Allowances For Electric Cars

Unlike cars with internal combustion engines (ICE), you can write off the whole cost of an electric vehicle that is being used for business purposes. The entire purchase price of the electric car can be put against your profits for tax relief in full. You can also choose to defer the tax deduction if you haven’t made enough profits to cover the costs of the car.

Capital Allowances For Hybrid Cars

If you buy a new car before April 2021 for business purposes and it emits less than 50g/kg of CO2 then you can write off the full costs the same way as you would for an electric car with a full 100% first-year allowance claim.

For hybrid cars bought after April 2021, you can benefit from the same rules as cars with low Co2 emissions at the 18% main pool writing down allowance rates.

How Should I Claim Capital Allowances For My Business Vehicles?

As cars begin to depreciate in value from the point of sale at a much faster rate than the 18% or 6% writing down allowance rates the most practical solution for businesses with cars used or purchased for business purposes is to defer the business tax relief for company cars until you have made enough profits to cover the costs of the car. 

For self-employed individuals where a car has been bought for business use but is also partly used for personal use, tax relief is portioned according to the ratio of annual business miles to total annual miles.

How Can CapEx Tax Help You To Claim Capital Allowances For Your Business Cars?

As most rules around capital allowances for cars were made five or more years ago it can be complex to work out exactly what you can claim and at what rate you should make the claim with HMRC. CapEx Tax specialists can help to take the stress out of calculating the claim and managing your applications with HMRC. Get in touch with our team of tax specialists today to discuss your claims further and get our help.