Capital Allowances Calculator

Capital allowances let UK businesses deduct the cost of qualifying capital assets from taxable profits over time, or in full in the year of purchase. The main routes are: Annual Investment Allowance (AIA) offering 100% relief on the first £1,000,000 of qualifying plant and machinery; Full Expensing at 100% for new (not second-hand) main-rate plant and machinery purchased by companies; and the 50% First Year Allowance for new special-rate assets like long-life assets and integral features.

Assets that don't qualify for first-year relief enter writing down allowance (WDA) pools. The main pool covers most plant and machinery at 18% per year on a reducing-balance basis. The special rate pool—covering integral features, long-life assets, and thermal insulation—writes down at 6% per year. Cars have specific rules: zero-emission cars get 100% first-year allowance, cars with CO₂ emissions up to 50g/km enter the main pool, and higher-emission cars enter the special rate pool.

Balancing allowances or charges arise when you dispose of an asset. If the disposal value is less than the pool balance, the shortfall is claimed as a balancing allowance. If the disposal value exceeds the pool balance, the excess is a balancing charge added to taxable profits. Accurate tracking of each pool's written-down value is essential for correct annual claims.

Capital allowances overview. Tax relief on capital expenditure (plant, machinery, equipment). Three main types: Annual Investment Allowance (AIA), First-Year Allowances (FYA), Writing Down Allowances (WDA). Cannot claim capital allowances on: buildings (except integral features), land, residential property. CAN claim on: machinery, vehicles (except cars usually), computers, furniture, fixtures, integral features (lifts, lighting, wiring), some software.

Annual Investment Allowance £1m. AIA gives 100% first-year tax relief on qualifying plant and machinery up to £1m per year. Permanent rate since April 2023 (raised from various lower rates). For SMEs spending under £1m on equipment: full immediate tax deduction = effective 25% Corporation Tax saving on the spend. Plan equipment purchases around AIA year-end. Group companies share single AIA — divided by associated companies count.

Full expensing (FE) for companies. From April 2023, companies (not sole traders/partnerships) can claim 100% first-year allowance on most qualifying plant + machinery — NO £1m cap. Effectively unlimited expensing. Excludes: cars (special rates), assets bought for leasing, second-hand assets. Makes UK one of most generous capital allowance regimes globally. Made permanent in 2024 Budget.

Cars and special rate pool. Cars receive WDA based on CO2 emissions: 100% first-year for zero-emission EVs (until 2025/26); 18% main pool for low-emission cars under 50g CO2; 6% special rate pool for >50g CO2 (most petrol/diesel cars). EVs through company: full first-year deduction makes them extremely tax-efficient. ICE company cars: only 6% WDA = slow tax relief over many years.