What Is Writing Down Allowance on Cars?

Writing down allowance (WDA) is the capital allowance method you use when a car doesn't qualify for full expensing or the annual investment allowance (AIA). It lets you write off the cost of the car against your taxable profits, but not all in one year. You claim a percentage of the cost each year, based on the car's CO2 emissions. For limited companies, the WDA reduces your corporation tax bill. For sole traders and partnerships, it reduces your income tax bill. The principle is the same: you spread the cost over several years instead of claiming it all upfront.

Which Cars Qualify for Writing Down Allowance?

Most cars used for business purposes fall into the WDA pool unless they qualify for one of the more generous allowances. Here is the quick test. If the car is brand new and zero-emission (electric), it qualifies for full expensing. You can deduct 100% of the cost in the first year. That is better than WDA, so you would not use WDA for those cars. If the car is second-hand or has CO2 emissions above zero, it goes into the WDA system. The rate you get depends on the car's CO2 emissions figure.

Main Rate Pool (18% WDA)

Cars with CO2 emissions of 50g/km or less go into the main rate pool. You claim 18% of the remaining value each year on a reducing balance basis. This covers most plug-in hybrids and some very low-emission petrol or diesel cars. If you bought a car after April 2021 that emits 50g/km or less, it qualifies for the 18% rate.

Special Rate Pool (6% WDA)

Cars with CO2 emissions above 50g/km go into the special rate pool. You claim 6% of the remaining value each year on a reducing balance basis. This covers the vast majority of petrol and diesel cars on UK roads. A typical family hatchback emitting 120g/km falls into this pool. So does a large executive saloon emitting 180g/km.

How Writing Down Allowance Is Calculated

The calculation is straightforward once you know which pool the car falls into. You take the cost of the car (excluding VAT if you can reclaim it). Then apply the relevant percentage to that cost for the first year. In the second year, you apply the same percentage to the remaining value after the first year's claim. Here is a worked example. A limited company buys a diesel car for £32,000. The CO2 emissions are 130g/km, so it goes into the special rate pool at 6% WDA. Year 1: £32,000 x 6% = £1,920 writing down allowance. The remaining value is £30,080. Year 2: £30,080 x 6% = £1,804.80 writing down allowance. The remaining value is £28,275.20. Year 3: £28,275.20 x 6% = £1,696.51 writing down allowance. And so on. The reducing balance method means the allowance gets smaller each year. The car never fully writes off to zero on paper, but in practice the remaining balance becomes negligible after 10 to 15 years.

What About Cars Bought Before April 2021?

The CO2 thresholds changed for cars bought on or after 1 April 2021. If you bought the car before that date, different thresholds apply. For cars bought before April 2021, the main rate pool (18%) applied to cars with CO2 emissions up to 110g/km. The special rate pool (6%) applied to cars with emissions above 110g/km. If you still have a pre-April 2021 car on your asset register, keep using the old thresholds for that specific car. The new thresholds only apply to cars bought from 1 April 2021 onwards.

Writing Down Allowance vs Full Expensing vs AIA

It helps to understand where WDA fits alongside the other capital allowance options. Full expensing gives you 100% first-year relief on qualifying new plant and machinery, including new zero-emission cars. It is the best option if you are buying a new electric car for your limited company. The annual investment allowance (AIA) gives you 100% relief on most plant and machinery up to £1,000,000 per year. But cars are specifically excluded from AIA. You cannot use AIA to claim the full cost of a car in one year. Writing down allowance is the default method for cars that do not qualify for full expensing. It is slower, but it is still a legitimate tax deduction.

Private Use and Writing Down Allowance

If you use the car partly for business and partly for private use, the calculation changes slightly. For a sole trader or partnership, you only claim WDA on the business-use proportion. If you use the car 60% for business and 40% for private use, you claim 60% of the WDA. For a limited company director, the rules are different. The company claims 100% of the WDA because the car is a company asset. But the director pays tax on the private use benefit through the benefit-in-kind (BIK) charge on form P11D. The company also pays Class 1A National Insurance on the BIK value.

Cars Costing Over £250,000

There is a special rule for expensive cars. If the car costs more than £250,000, the WDA is capped. The maximum WDA you can claim in any single year is limited to the allowance that would apply if the car cost exactly £250,000. The excess cost above £250,000 does not qualify for any capital allowance. This rule catches very high-value cars like luxury sports cars and high-end executive saloons. Most business cars fall well below this threshold, so it rarely applies in practice.

Disposing of a Car and Balancing Adjustments

When you sell or dispose of a car that has been in the WDA pool, you need to account for the disposal. If you sell the car for less than its tax-written-down value, you get a balancing allowance. This is the difference between the sale proceeds and the remaining value. It gives you extra tax relief in the year of disposal. If you sell the car for more than its tax-written-down value, you get a balancing charge. This is treated as additional taxable income in the year of disposal. For cars in the main rate pool or special rate pool, disposals are pooled. You do not calculate a balancing adjustment on each individual car. Instead, you add the sale proceeds to the pool and the WDA calculation continues as normal.

Practical Tips for Claiming Writing Down Allowance

Keep a record of the car's CO2 emissions figure. You can find this on the vehicle's V5C log book (section 4) or on the manufacturer's website. Without the CO2 figure, HMRC will default to the special rate pool at 6%. If you are buying a car through your limited company, compare the total tax position. A new electric car gives you full expensing and a low BIK rate (2% in 2025/26). A diesel car gives you 6% WDA and a much higher BIK rate. The electric car is almost always better for tax. If you are a sole trader using your own car for business, you can choose between claiming capital allowances (including WDA) or using the simplified mileage rate of 45p per mile for the first 10,000 miles. The mileage rate includes both the running costs and the depreciation, so you cannot claim WDA on top of it.

Common Mistakes with Writing Down Allowance

Mistake one: claiming AIA on a car. Cars are specifically excluded from the annual investment allowance. If you try to claim 100% of a car's cost through AIA, HMRC will reject it. Mistake two: using the wrong CO2 threshold. The thresholds changed in April 2021. If you bought a car after that date, use the 50g/km threshold. If you bought it before, use the 110g/km threshold. Mistake three: forgetting the private use adjustment. Sole traders and partnerships must restrict the WDA claim to the business-use proportion. Claiming 100% when the car is used partly privately is incorrect. Mistake four: not pooling disposals correctly. When you sell a car, add the sale proceeds to the pool. Do not remove the car from the pool without accounting for the disposal.

How Holloway Davies Can Help

As ICAEW qualified accountants, we deal with capital allowance calculations regularly. We can help you work out the correct WDA rate for your cars, ensure your claims are accurate, and advise on whether a different ownership structure would be more tax efficient. If you are considering buying a car through your business, speak to us first. The difference between full expensing, WDA at 18%, and WDA at 6% can be thousands of pounds in tax relief over the car's life. Contact our team or visit our services page to see how we support UK businesses with corporation tax, capital allowances, and tax planning. You can also read more on our corporation tax blog for regular updates on tax rules that affect your business.

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