03 Jul 2020 12:34 PM

Thinking of buying a company car – you may need to act now!

For some time now, tax law has been attempting to drive company cars to be greener by reducing the tax relief available and the next stage of this is upon us from April 2021 with a significant reduction in the capital allowances available on the purchase price of the car.

Only cars with CO2 emission of 50 g/km or less will attract main pool rate capital allowances, pushing many low emission cars which were previously attracting 18% per annum allowances into the special rate pool for only 6% writing down allowance.

To demonstrate the effect of this, we have used the Audi A1 (1.6TDI SE), the most economical of the A1 range, by way of example to show how the allowances received would change if you were to buy the car now compared with buying it from April next year using the base specification list price of £15,335.

This graph shows how the capital allowances received over the first 20 years are significantly reduced where the same car, the Audi A1, is bought from April 2021 (red line) compared with if bought now and prior to April 2021 (blue line).

So if you are thinking of buying a car in your company, it may be worth considering making that purchase before April 2021 to maximise your tax relief. Talk to us if you have a car purchase in mind and would like us to evaluate your options.