Claiming tax relief on your business assets
Capital allowances let UK businesses deduct the cost of qualifying capital items from taxable profits, lowering Corporation Tax or Income Tax. Relief can be spread over several years or, in some cases, taken in full in the year of purchase. They cover longer-term purchases such as equipment, machinery, business vehicles and fixtures within buildings, rather than day-to-day running costs.
The main types are the Annual Investment Allowance (AIA), First-Year Allowances (FYAs) and Writing Down Allowances (WDAs). Each has its own rates and rules, so choose the right one for each asset.
Plant and machinery
- Relief is available on qualifying plant and machinery, including equipment, computers and furniture.
- Certain integral features within buildings can qualify.
- Businesses letting commercial property may also qualify, subject to conditions.
- Special rules apply to business cars and certain environmentally friendly equipment.
Annual Investment Allowance
The AIA can give a 100% deduction for most qualifying plant and machinery costs, excluding cars, up to the annual limit. Where the AIA can’t be claimed, WDAs may apply, and Structures and Buildings Allowance may cover qualifying building costs. The AIA may need to be shared between businesses under common ownership.
| Business type | AIA limit |
|---|---|
| Companies | £1,000,000 |
| Sole traders and partnerships | £1,000,000 |
Who qualifies for capital allowances?
- Limited companies: UK companies paying Corporation Tax can claim against taxable profits.
- Sole traders and partnerships: Claims are made through Self Assessment and reduce Income Tax.
- Property owners and landlords: Owners of commercial property may claim on certain fixtures, such as electrical systems and air conditioning.
- Specific sectors: Some sectors may qualify for additional allowances, so seek advice.
Land, buildings (other than certain fixtures), items for non-business use and leased assets generally don’t qualify. Keep invoices, purchase dates, costs and records of business use.
Cars
Car spending generally goes into one of the two plant and machinery pools. AIA can’t be claimed on any car, although a 100% FYA may be available on certain new cars.
| CO2 emissions (g/km) | Pool | Allowance |
|---|---|---|
| 0 | Main rate | 100% FYA |
| 50 or below | Main rate | 14% WDA |
| Over 50 | Special rate | 6% WDA |
Other plant and machinery allowances
- Main rate pool: spending that doesn’t qualify for AIA, or where AIA isn’t claimed.
- Special rate pool: certain qualifying spending calculated under special rate rules.
- Writing Down Allowances: 14% a year for the main rate pool and 6% for the special rate pool.
- Zero-emission cars and EV charging equipment: a 100% first-year allowance may apply to new, unused items.
Other allowances
| Type | Allowance |
|---|---|
| FYA on certain main rate plant and machinery bought on or after 1 January 2026 (excludes cars and second-hand assets) | 40% |
| FYA on new zero-emission cars and electric charge points bought 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 and integral features | 50% |
How to claim capital allowances
- Limited companies: claim in the Company Tax Return (CT600), within the Corporation Tax computation.
- Sole traders and partnerships: claim through Self Assessment alongside your annual accounts.
You’ll need a list of assets with purchase dates and costs, the type of allowance claimed and your calculations. If you sell or dispose of an asset, you may need a balancing adjustment.
Frequently Asked Questions
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What are Capital Allowances?
Capital allowances allow UK businesses to deduct the cost of qualifying assets from their taxable profits.This reduces the amount of profit on which Corporation Tax or Income Tax is calculated.They help businesses manage tax costs when investing in equipment and other eligible assets.
What Can I Claim Capital Allowances On?
Businesses can claim capital allowances on qualifying equipment, machinery, tools and certain business vehicles.Some building fixtures and other assets may also qualify, depending on the applicable tax rules.The type of asset and how it is used determine the relief available.
Can I Claim Capital Allowances On Cars?
Yes, businesses can claim capital allowances on cars used for business purposes, subject to specific rules.
The allowance rate depends on the car’s CO₂ emissions and whether it is electric or conventional.Private use and other restrictions may affect the amount of tax relief available.
What Is the Annual Investment Allowance?
The Annual Investment Allowance (AIA) provides 100% tax relief on most qualifying plant and machinery purchases.Businesses can generally claim up to £1 million in qualifying expenditure per year.Cars and certain other assets are excluded from the AIA.
How Do Writing Down Allowances Work?
Writing Down Allowances (WDAs) allow businesses to claim tax relief on qualifying asset costs over several years.The remaining value of an asset is reduced by the applicable allowance rate each tax year.The rate depends on whether the asset belongs to the main-rate or special-rate pool.
What Happens If I Sell an Asset I Claimed For?
Selling or disposing of an asset may affect the capital allowances previously claimed by a business.The disposal value is considered when calculating any balancing charge or balancing allowance.The final tax treatment depends on the asset and the allowances claimed.
How Do I Claim Capital Allowances?
Limited companies generally claim capital allowances through their Company Tax Return (CT600).Sole traders and partnerships usually claim through their Self Assessment tax returns.Businesses should keep invoices and asset records to support their claims.
Do All Business Assets Qualify for Capital Allowances?
No, not all business assets qualify for capital allowances under UK tax rules.Land and certain other assets are generally excluded, while specific rules apply to buildings and leased assets.Businesses should check the eligibility of each asset before claiming tax relief.