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cm club - can someone explain capital allowance on car less than £10,000 so i understand!

1 reply

sunnyshine · 21/03/2010 14:56

new car bought, less than £10,000. Am interested in claimng as capital allowance but cant find any facts or figures etc. help me!

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Are your children’s vaccines up to date?
mranchovy · 21/03/2010 16:14

If this is a new car (not second hand) and it has CO2 emissions less than 110g per km, you can claim 100% of the (business share of the) cost as a First Year Allowance.

Otherwise, cars are not eligible for the 100%/£50,000 Annual Investment Allowance (AIA) so you can only claim the normal Plant and Machinery Writing Down Allowance (WDA) of 20%, capped at £3,000pa. Again this allowance will be reduced to the business share.

Business use share is normally calculated by mileage, so it is only usually worthwhile claiming capital allowances (and apportioned share of fuel and other expenses) if both the private and business mileages are low.

For instance if your car cost £9,000 and you do 5,000 private miles and 10,000 business miles (so private miles are only half of business miles, but business miles are not low), you will be entitled to £1,800 WDA in the first year reduced by 2,000/(2,000+6,000) ie to £1,200. You could also claim for 2/3 of your petrol, road tax and servicing etc - perhaps this could be another £1,300 so £2,500 in all.

But if you claimed the 40p per mile fixed profit rate you would claim £4,000.

Bear in mind also that once you have decided to go for actual expenses instead of the FPS you have to stick with it until you sell that car, and of course in the second year your WDA would be only 20% x £7,200 x 2/3 (£940?).

So in summary, unless you have an electric car it is usually better to stick to the FPS.

Lots of information available on HMRC site and elsewhere, but probably the best place to start for further information is Business Link.

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