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Capital allowances

Plant and machinery allowances and the allowances available for other assets.

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

Type Allowance
First Year Allowance (FYA) on certain plant and machinery main rate assets (if purchased on or after 1 January 2026)
Exclusions apply including cars and second-hand assets
40%
First Year Allowance (FYA) on new zero emission cars and electric charge points (if purchased before 1 April 2027) 100%
Corporation tax FYA ('full expensing') on certain new, unused plant and machinery 100%
Corporation tax FYA on new, unused long-life assets, integral features of buildings, etc. 50%

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:

Emissions (g/km) Pool Allowance
0 Main rate 100% FYA
≤ 50 Main rate 14% WDA
> 50 Special rate 6% WDA
ACCA Approved EmployerACCA sage aat xero

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Walkers Accountants Limited is a limited company registered in England and Wales, number 06421546. The registered office is Aireside House, Aireside Business Centre, Royd Ings Avenue, Keighley, BD21 4BZ where a list of members is kept.
Walkers Accountants Limited is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities.
Walkers Audit Limited is registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales. Registered as a limited company in England and Wales, number 16478384. The registered office is Suite 3 Aireside House, Aireside Business Centre, Royd Ings Avenue, Keighley, West Yorkshire BD21 4BZ where a list of members is kept.
Walkers is a trading style of Walkers Accountants Limited and Walkers Audit Limited
Registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales