Capital allowances

Plant and machinery

The cost of pur­chas­ing cap­i­tal equip­ment in a busi­ness is not a rev­enue tax deductible expense. How­ev­er, tax relief is avail­able on cer­tain cap­i­tal expen­di­ture in the form of cap­i­tal allowances.

Plant and machin­ery allowances may be avail­able on items such as machines, equip­ment, fur­ni­ture, cer­tain fix­tures in a build­ing (‘inte­gral fea­tures’), com­put­ers, cars, vans and sim­i­lar equip­ment used in a busi­ness.

There are spe­cial rules for cars and cer­tain ‘envi­ron­men­tal­ly friend­ly’ equip­ment.

Plant and machin­ery allowances may be avail­able to own­ers of com­mer­cial prop­er­ty which is let out to a busi­ness.

The Annu­al Invest­ment Allowances (AIA) gives a 100% write-off on most types of plant and machin­ery (but not cars) up to an annu­al lim­it.

Writ­ing down allowances (WDA) are giv­en for expen­di­ture for which AIA is not, or can­not be, claimed.

A Struc­tures and Build­ings Allowance of 3% may be avail­able for qual­i­fy­ing invest­ments to con­struct new, or ren­o­vate old, non-res­i­den­tial struc­tures and build­ings.

AIA

The AIA may need to be shared between cer­tain busi­ness­es under com­mon own­er­ship.

AIA lim­it — com­pa­nies: £1,000,000

AIA lim­it — sole traders and part­ner­ships: £1,000,000

Other plant and machinery allowances

Expen­di­ture upon which AIA is not given/claimed will obtain relief through the ‘Main rate pool’ or the ‘Spe­cial rate pool’ rather than each item being dealt with sep­a­rate­ly.

The annu­al rate of WDA is 14% (pre­vi­ous­ly 18%) in the ‘Main rate pool’ and 6% in the ‘Spe­cial rate pool’. The 14% rate applies from 1 April 2026 (6 April 2026 for income tax), sub­ject to tran­si­tion­al rules for charge­able peri­ods which strad­dle those dates.

A 100% first year allowance (FYA) may be avail­able on cer­tain ener­gy effi­cient plant and cars.

Other allowances

Cars

For expen­di­ture incurred on cars, costs are gen­er­al­ly allo­cat­ed to one of the two plant and machin­ery pools.

AIA is not avail­able on any car but a 100% FYA may be avail­able on cer­tain cars. To qual­i­fy for FYA, the car must be pur­chased new.

Cars acquired before April 2027: