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
| 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 |
