THE Chancellor announced in his Budget that first year allowances (FYA) for ultra low emission vehicles (ULVs) will be extended until 31 March 2018.
The current allowance had been due to terminate on 31 March 2015.
The Chancellor is hoping to improve the current tenuous take up of such vehicles.
But, from 1 April 2013 the emissions threshold below which cars are eligible for the allowance will drop from 110g/km to 95g/km (click here for more on this).
However, the tax break drops again from April 2015, when it falls from 95g/km to 75g/km.
For SMEs who rely on leasing their business cars, an even bigger change is that leased cars will no longer be eligible for the 100% first year allowance – and the Budget has left this untouched.
The effect will be to raise the business lease rental cost of such cars by about £15 a month.
Many SMEs rely on leasing for their business vehicles and the removal of low emitting vehicles could potentially lead them to choose cars that are cheaper than ULVs but with higher emissions. This could well cause a backward step in the move to greener motoring that the government is supposed to be encouraging.
For business cars on the main rate, a reminder that there will be no transitional arrangements for capital allowances as it reduces from 160g/km to 130g/km from April 2013. Also the threshold above which the 15% Lease Rental Restriction applies also reduces from 160g/km to 130g/km.
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