Business owners often rely on their cars and other vehicles. In fact, recent figures from the Society of Motor Manufacturers and Traders show that fleet and business registrations made up more than 60% of new car sales in 2025.
The good news is that if you buy and use cars for your business, you can claim Capital Allowances on them. This means you can deduct a portion of the vehicle’s value from your profits before calculating your tax bill.
In this article, we focus on the Capital Allowances rules for cars. We explain exactly which vehicles qualify as a car for tax purposes, how different vehicle types and CO2 emissions affect your claim, and what the latest legislation means for your overall tax liability.
A quick introduction to Capital Allowances
Capital Allowances act as a form of tax relief, allowing businesses to deduct some or all of an asset’s value from their profits before tax. They are available to businesses subject to UK Tax in respect of qualifying capital expenditure.
Capital Allowances rates vary, as eligibility criteria differ depending on the specific vehicle. In some cases, you can write off the entire cost of an asset in one year, which can drastically reduce your tax bill. In other cases, you’ll offset a percentage of the asset’s value against your tax bill for every year you continue to own it, spreading the tax relief over several years.
You can find out more by reading our guide to Capital Allowances.
What is classed as a car?
For Capital Allowances purposes, a car is a type of vehicle that:
- is suitable for private use (including motorhomes)
- is the type of vehicle most people would use privately
- was not specifically made for transporting goods
What isn’t classed as a car?
The following vehicles are not classed as cars, meaning you can claim the annual investment allowance (AIA) on them:
- motorcycles (except those bought before 6 April 2009)
- trucks, lorries and vans
What rate will my car qualify for?
A vehicle’s CO2 emissions figure is a key factor in calculating Capital Allowances for expenditure on a car if purchased on or after 1 April 2021.
There are three different rates/pools depending on your car’s CO2 emissions:
| Pool type | Description of car | Rate |
|---|
| Main pool | New & unused cars with CO₂ emissions of 50g/km and below | 18% (14% from 1 April 2026 for corporation tax and 6 April 2026 for income tax) |
| Second-hand cars with CO₂ emissions of 50g/km and below or a second-hand electric car |
| Special rate pool | New/second-hand cars with CO₂ emissions of more than 50g/km | 6% |
| First year allowances (FYAs) | New & unused cars with CO₂ emissions of 0g/km, or if the car is electric | 100% |
Cars are treated differently from other assets. They do not qualify for the annual investment allowance (AIA), nor can you claim full expensing or the 50% special rate allowance when buying one.
How different vehicles affect your claim
| Type of vehicles | Type of Capital Allowance |
|---|
| Electric cars | 100% first year allowances for most new and unused electric cars |
| Hybrid/standard cars | This depends on your CO₂ emissions. Anything of 50g/km or less means you can claim the main rate allowance of 18% (or 14% from April 2026). Emissions over this will land you in the special rate allowance at 6%. |
| Vans and commercial vehicles | Commercial vehicles like vans, black cabs and tractors for example, are entitled to either writing down allowances, or the annual investment allowance if they are used solely for business purposes. The CO₂ rate doesn’t apply to these sorts of vehicles. |
From 1 April 2025 (for corporation tax), and 6 April 2025 (for income tax), double-cab pickups (meaning those with a passenger cab, two rows of seats, four doors and an external pickup area at the back) will generally be classed as cars when it comes to Capital Allowances. However, the two-door versions with just a single row of seats are still classed as vans.
There are transitional arrangements for double cab pickups if you order one before 1 April 2025 (for corporation tax) or 6 April 2025 (for income tax). Provided the vehicle is paid for before 1 October 2025, these vehicles will keep their previous tax treatment as vans for Capital Allowances purposes.
How Leyton can help
For business vehicles such as cars, understanding the Capital Allowances rules is essential for tax-efficient business planning. With the government’s focus on reducing carbon emissions, the tax advantages for low and zero-emission vehicles are likely to remain significant.
By staying informed about the current rates and thresholds and planning your vehicle acquisitions strategically, you can maximise your tax benefits while contributing to environmental sustainability. Our specialist team of Capital Allowances experts can provide advice and support to help you make the most of your business investments.
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