If you buy a car that you use for practice work, you will be able to claim capital allowances on its cost each year in which you use it for business purposes. The amount of allowance that you can claim depends on its CO2 emissions.
If you are the first registered owner of an environmentally friendly car emitting no more than 110g/km CO2 you can claim 100 per cent capital allowances pro rata to your business use of the car (the percentage of cost relating to private use must first be deducted) in the first year of ownership.
If the car emits more than 110g but less than 160g CO2 you can claim 20 per cent of the cost annually on a reducing balance basis (after adjusting for private use). For cars with CO2 emissions more than 160g you can claim 10 per cent annually.
For example, if a car costing £29,000 emits 159g CO2 and you are claiming 50 per cent business use, the tax relief in the first year would be £1,160. The calculation is: £29,000 x 20 per cent = £5,800 x 50 per cent business use = £2,900 x 40 per cent tax relief. In the following year the 20 per cent would be calculated on the reduced cost of £23,200 (£29,000 less £5,800).
In the year that you sell the car you will get tax relief on the difference between the sale price and the amount not yet written off. In the above example if you sold the car in the second year for £19,000, the tax value brought forward was £23,200 and you would be able to claim an allowance on the business use of £4,200 (£23,200 less £19,000).