First-year allowances for business cars from April 2021

Budget 2020 announced the extension of 100% first-year allowances for zero-emission cars, zero-emission goods vehicles and equipment for gas refuelling stations by four years from April 2021.

CO2 emission thresholds will also be amended from April 2021. These determine the rate of capital allowances available through which the capital expenditure for business cars can be written down. The thresholds will be reduced from 50g/km to 0g/km for the purpose of the first-year allowances for low CO2 emission cars and from 110g/km to 50g/km for the purpose of writing down allowances (WDAs) for business cars.

Comment

The reduction in thresholds will mean that only business cars acquired with CO2 emissions of 0g/km will be eligible for first-year allowances. Ultra-low emission vehicles which currently qualify for first-year allowances if 50g/km or less will no longer qualify. They will be eligible for WDAs at the main rate (18%). Cars with CO2 emissions exceeding 50g/km will be eligible for WDAs at the special rate (6%).

Van benefit charge nil-rating for zero-emission vans

From 6 April 2021, a nil rate of tax applies to zero-emission vans within the van benefit charge. In 2020/21 such vans have a van benefit charge at 80% of the standard flat rate of £3,490.

Comment

A zero-emission van is a van that cannot in any circumstances emit CO2 emissions when driven. Governments have provided varying amounts of discounts from the van benefit charge for zero-emissions vans since 2010. We are now back to the policy which applied from 2010 to 2015 when there was no charge.

Easement for employer-provided cycles exemption

The government will legislate in Finance Bill 2021 to introduce a time-limited easement to the employer-provided cycle exemption to disapply the condition which states that employer-provided cycles must be used mainly for journeys to, from, or during work. The easement will be available to employees who have joined a scheme and have been provided with cycle or cycling equipment on or before 20 December 2020.

The change will have an effect on and after the Royal Assent of Finance Bill 2021 and be in place until 5 April 2022, after which the normal rules of the exemption will apply.