Writing Down Allowance on Cars: 2026/27 Rules for UK Property Investors

Writing down allowance on cars lets a property business deduct the cost of a business car against its taxable profit over a number of years rather than all at once. For 2026/27 the main pool rate is 14% (cut from 18% from April 2026), the special rate pool stays at 6%, and only new and unused zero-emission cars qualify for the 100% first-year allowance under CAA 2001 s.45D. This guide sets out which pool your car falls into, how the reducing-balance calculation works, what changed in April 2026, and how the relief interacts with Section 24 and Making Tax Digital for property investors.

For the wider plant-and-machinery framework that sits behind car allowances, see our capital allowances for property investors pillar guide. For the broader picture of what landlords can deduct, see our complete list of landlord tax deductions.

What is writing down allowance on cars?

Writing down allowance (WDA) is a type of capital allowance. Cars are plant for capital allowance purposes but are governed by a special set of rules that keep them out of the more generous reliefs available to other equipment. Instead of deducting the whole cost in one year, you write the car's cost down by a fixed percentage of the remaining balance each year.

A car for these rules is a vehicle that is suitable for private use and was not built mainly to carry goods. A motorcycle is not a car for capital allowance purposes (motorcycles bought on or after 6 April 2009 are treated as ordinary plant and machinery), and most vans are goods vehicles rather than cars, which is why vans get much better relief.

You can claim WDA on a car only where it is used in a qualifying activity. For most readers of this page that activity is a UK property business carried on either personally or through a company. The car must be genuinely used for the business, and where there is private use the claim is restricted to the business proportion.

Which pool does your car go into?

The rate of allowance depends on the car's CO2 emissions and whether it is new or second-hand. There are three possible outcomes, set by HMRC's business cars rules for cars bought from April 2021 onwards.

Car type	Treatment	Rate
New and unused, 0g/km CO2 (electric or hydrogen)	100% first-year allowance (CAA 2001 s.45D)	100% in year one
CO2 of 50g/km or less (and second-hand electric cars)	Main rate pool	14% reducing balance
CO2 above 50g/km	Special rate pool	6% reducing balance

Two points trip people up most often. First, the 100% first-year allowance is restricted to zero-emission cars that are new and unused; a car emitting even 1g/km does not qualify, and neither does a used electric car. Second, a second-hand electric car goes into the main pool at 14%, not the 100% allowance. So buying a nearly-new used EV is very different, for tax, from buying it new.

Cars are excluded from the Annual Investment Allowance entirely, and they are also excluded from the new 40% first-year allowance introduced for other main-pool plant and machinery from 1 January 2026. For cars, the only routes are the 100% s.45D allowance (zero-emission, new) or the pool-based WDA.

The April 2026 rate cut: 18% down to 14%

The main pool writing down allowance was reduced from 18% to 14% from 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax, legislated in Finance Act 2026 amending CAA 2001 s.56. The special rate pool is unchanged at 6%.

Three things follow from this for a property investor:

• It applies to your existing pool, not just new purchases. The 14% rate is applied to the remaining balance of the whole main pool from the first chargeable period beginning on or after the change date, so a car you bought a few years ago and are still writing down moves to 14% as well.
• Straddling periods use a hybrid rate. If your accounting period spans the change date, you apply a blended rate based on the number of days falling before and after the change. A 31 December 2026 year end, for example, runs at 18% for the days to 31 March 2026 and 14% thereafter, weighted by days.
• Relief is now slower, which raises the value of the 100% allowance. Writing a petrol or diesel car down at 14% (or 6%) takes many years to give full relief. A new zero-emission car that gets 100% relief in year one is, in cash-flow terms, materially more attractive than it was when the gap was 18% versus 100%.

How the reducing-balance calculation works

Writing down allowance is calculated on the reducing balance: you apply the rate to what is left in the pool each year, never to the original cost. Here is a worked example for a main-pool car bought for £20,000 by a landlord using actual costs (not mileage rates), with full business use.

Year	Opening balance	WDA at 14%	Closing balance
1	£20,000	£2,800	£17,200
2	£17,200	£2,408	£14,792
3	£14,792	£2,071	£12,721
4	£12,721	£1,781	£10,940

The allowance gets smaller every year because the balance it is applied to keeps shrinking. After four years more than half the original cost is still sitting unrelieved in the pool. A higher-emission car in the special rate pool at 6% writes down even more slowly.

Contrast that with a new electric car bought for £35,000. Because it is new, unused and zero-emission, it qualifies for the 100% first-year allowance under s.45D, so the whole £35,000 is deducted in year one (subject to any private-use restriction). That single-year deduction, against a property profit, is the headline reason the rules favour new EVs so heavily.

Private use and the single-asset pool

If you are a sole-trader or partnership landlord and the car has private use, you cannot pool it with everything else, because the private element has to be stripped out each year. Instead the car sits in its own single-asset pool and the allowance is restricted to the business-use proportion.

For example, a landlord buys a £20,000 main-pool car used 70% for property business journeys (visiting properties, meeting agents, going to viewings) and 30% privately. Year one WDA is calculated as £20,000 × 14% = £2,800, but only 70% (£1,960) is allowable; the full £2,800 still reduces the pool balance to £17,200 for next year. Accurate, contemporaneous mileage records are essential to defend the proportion if HMRC asks.

A company that owns the car does not make a private-use restriction in the same way; instead the employee or director is taxed on a car benefit in kind, and the company claims the full allowance. For property investors weighing personal versus company ownership, see our buy-to-let limited company guide.

Mileage rates versus capital allowances

You have a choice when a car first enters the business. You can either claim simplified mileage rates (55p per mile for the first 10,000 business miles in the tax year, then 25p per mile) or claim actual running costs plus capital allowances. You cannot mix the two methods for the same car.

Mileage rates are simpler and avoid pool tracking, balancing charges and private-use apportionment, and they are often better for a low-value, high-mileage car. Capital allowances tend to win for an expensive car or a new electric car, where the 100% first-year allowance can deliver a large up-front deduction that mileage rates could never match. The decision is made per vehicle and, once you start using mileage rates for a car, you must continue with that car until you change it.

Cash basis landlords and cars

Most individual landlords now use the cash basis by default for a UK property business. Under the cash basis you generally cannot claim capital allowances, with one important exception: cars. A cash-basis landlord can still claim capital allowances on a business car (or, alternatively, use mileage rates). This is why the car rules matter even to landlords who otherwise never touch a capital allowance computation. The cash basis does not change the WDA rates or the CO2 thresholds; it only affects which other assets you can claim on.

Selling the car: balancing allowances and charges

When you dispose of a car you bring in a disposal value, usually the sale proceeds (or open market value where you sell to a connected person). What happens next depends on how the car was held:

• Single-asset pool (private use, or short-life asset election): compare the disposal value with the remaining balance. If you sold for less than the written-down value, you get a balancing allowance (extra relief). If you sold for more, you have a balancing charge (a clawback added back to profit). A balancing charge is common with cars that hold their value, because tax depreciation at 14% or 6% lags real-world value.
• General main or special rate pool: the disposal value simply reduces the pool balance. A balancing event usually only arises when the qualifying activity itself ends.

If you claimed the 100% first-year allowance on a new electric car, the full sale proceeds on a later disposal are brought in as a balancing charge, because the car's pool value was written down to nil in year one. That is not a penalty, just the system recovering relief you have already had on value you recouped on sale.

Writing down allowance and Section 24

Section 24 restricts finance-cost relief for individual landlords, giving relief on mortgage and loan interest as a basic-rate tax reducer rather than a deduction from profit. It does not touch capital allowances. Writing down allowance on a business car is an ordinary deduction from your property profit and is unaffected by Section 24.

From 6 April 2027 the finance-cost reducer is given at the new property basic rate of 22% (Finance Act 2026), up from 20%, but this concerns interest, not car allowances. For the full mechanics of the interest restriction, see our complete guide to Section 24 and our overview of capital allowances and landlord tax relief.

Making Tax Digital and car allowances

Making Tax Digital (MTD) for Income Tax is live and is being phased in by income level: landlords and sole traders with gross income over £50,000 are mandated from 6 April 2026, over £30,000 from 6 April 2027, and over £20,000 from 6 April 2028. The gross income test for property looks at rental turnover, not profit.

Once in scope you must keep digital records and file quarterly updates. Capital allowances, including your car WDA, are dealt with in the year-end final declaration rather than in the quarterly updates, but you still need clean digital records of the car cost, disposal proceeds and business-mileage split. For the mandation detail and what counts towards the threshold, see our Making Tax Digital for landlords guide.

Common mistakes to avoid

• Assuming any electric car gets 100% relief. Only new and unused, zero-emission cars qualify. A second-hand electric car goes into the main pool at 14%.
• Treating cars like other plant. Cars are excluded from the Annual Investment Allowance and from the new 40% first-year allowance, so you cannot deduct the full cost of a petrol or diesel car in one year.
• Using the old 18% rate. The main pool rate is 14% from April 2026, not 18%. Check whether your accounting period straddles the change and needs a hybrid rate.
• Double-counting with mileage rates. You cannot claim both mileage rates and capital allowances on the same car.
• No mileage records. Without a contemporaneous business-mileage log, the private-use restriction is hard to defend on enquiry.
• Forgetting the balancing charge on sale. Selling a fully written-down car (especially one given the 100% allowance) usually brings the proceeds back into profit.

Summary

• Main pool WDA on cars is 14% from April 2026 (down from 18%); special rate pool stays at 6%.
• Only new, unused, zero-emission cars get the 100% first-year allowance under s.45D, available to 31 March 2027 (CT) and 5 April 2027 (IT).
• Cars are excluded from both the Annual Investment Allowance and the new 40% first-year allowance.
• Restrict the claim to business use and keep mileage records; private-use cars sit in a single-asset pool.
• Capital allowances are not restricted by Section 24, and the rules are the same across the UK (only the property purchase taxes differ).

If you are weighing up how to fund a business vehicle tax-efficiently within a property portfolio, our team can help. Learn more about what a property accountant does or get in touch to discuss your situation.

Sources

1. gov.uk: Claim capital allowances: business cars - GOV.UK
2. legislation.gov.uk: CAA 2001 s.45D: first-year allowances for low-emission cars
3. gov.uk: Capital allowances: new first-year allowance and reducing main rate writing-down allowances - GOV.UK
4. legislation.gov.uk: Finance Act 2026
5. gov.uk: Work out your writing down allowances - GOV.UK