There was some confusion when Finance Act 2020 was published. The government had announced that it would be extending the current enhanced 100% first year allowance (FYA) available for zero-emission vehicles. However, when the legislation was published there was no mention of any extension, leading to speculation that the FYA would be scrapped in April 2021.
The position has now been clarified, and the 100% FYA will be available for the purchase of zero-emission cars until April 2025. It will also be available for purchases of equipment for gas refuelling stations and zero-emission goods vehicles.
The FYA is available in addition to the Annual Investment (AIA). The AIA has been subject to a temporary increase from £200,000 to £1 million since 1 January 2019. It was recently confirmed that this would be extended to 31 December 2021 instead of ending in 2020.
It is worth noting that neither the FYA or AIA need to be claimed and, in some circumstances, it might be disadvantageous to. Writing down allowances (WDAs) may be claimed instead.
Other business cars
Cars that do have emissions are subject to different rules. Currently, cars with an CO2 official emissions figure not exceeding 50 g/km qualify for the FYA. This will continue until April 2021. After that, such vehicles will only qualify for WDAs at the more generous 18%. Cars with emissions exceeding 50 g/km will qualify for WDAs at 6% from April. Under the current rules, WDAs at 18% are available for cars with emissions not exceeding 110 g/km, so it is clear that the government is incentivising the purchase of low and zero emission vehicles as part of its drive to phase out petrol and diesel sales.