Tax relief for business expenditure on cars is given by way of capital allowances which are the equivalent for tax purposes of the depreciation charge made for accounting purposes.
Expenditure incurred on a car is normally allocated to one of two main capital allowance pools for plant and machinery. Expenditure on cars with emissions of up to 130g/km go into the main pool attracting capital allowances at 18% per annum. Cars with higher emissions attract allowances at 8% in the special rate pool. From April 2018 the CO₂ threshold for the main pool will be reduced to 110g/km.
100% first year allowances (FYAs) for new cars with very low emissions are available until 31 March 2021. The current threshold for low emissions is 75g/km but this is set to be reduced to 50g/km from April 2018. So a business will get faster tax relief for a low emissions car if it is bought through the business.
For a sole trader or partnership cars with private use are kept in a single asset pool but the rate at which capital allowances are given is still determined based on the emissions.
When the car is sold the disposal proceeds are deducted from the appropriate capital allowances pool. If that car had been fully written down (100% FYA claimed) then tax would be due on the amount the vehicle was sold for at that time.
This is not advice or recommendation; it is intended to be practical, useful guidance on what to consider, what steps you may wish to take and/or where to look further.