Capital Allowances Calculator

Capital allowances let a UK business take the cost of qualifying capital assets off taxable profits, either spread over several years or in full in the year of purchase. Four routes give relief straight away. The Annual Investment Allowance covers the first £1,000,000 of qualifying plant and machinery at 100%. Full Expensing gives companies 100% on new main-rate plant and machinery, with second-hand items excluded. New special-rate assets, such as long-life assets and integral features, attract a 50% First Year Allowance instead. And from 1 January 2026 a permanent 40% First Year Allowance covers new main-rate plant bought by businesses that full expensing does not reach, such as sole traders, partnerships and buyers of assets for leasing.

Not everything counts as plant and machinery. Buildings, land and residential property sit outside the regime, apart from integral features within a building. What does qualify runs from machinery and computers to furniture, fixtures, some software, vehicles other than cars, and integral features such as lifts, lighting and wiring. Cars are handled separately from other vehicles and follow their own rules, which is where a good many claims come unstuck.

The £1m Annual Investment Allowance has been permanent since April 2023, after years of bouncing between lower figures. For a business spending under £1m on equipment it means deducting the whole cost immediately, worth an effective 25% Corporation Tax saving on the spend, so the timing of a large purchase around the year end deserves some thought. Group companies do not each get their own allowance, and associated companies share a single one between them.

Full Expensing, introduced in April 2023 and made permanent in the Autumn Statement of November 2023, goes further for companies. There is no £1m cap, so most qualifying plant and machinery is written off in full however much is spent. Sole traders and partnerships cannot use it, and it excludes cars, assets bought for leasing and anything second-hand, although since January 2026 unincorporated businesses and leasing buyers can take the 40% First Year Allowance on new main-rate plant above the AIA. Between these two reliefs, the UK now sits among the more generous capital allowance regimes anywhere.

Assets that miss out on first-year relief go into writing down allowance pools instead, where relief arrives gradually on a reducing balance. The main pool covers most plant and machinery at 14% a year. The special rate pool, holding integral features, long-life assets and thermal insulation, runs at 6%. Disposals then have to be reflected in the pool balance. Sell for less than the written-down value and the shortfall is claimed as a balancing allowance. Sell for more and the excess becomes a balancing charge, added to taxable profits. Tracking the written-down value of each pool accurately is what keeps annual claims right.

Cars follow their carbon dioxide emissions rather than the usual categories. A new zero-emission car qualifies for a 100% first year allowance until 31 March 2027 for companies and 5 April 2027 for other businesses, which is why electric vehicles bought through a company are so efficient. Cars emitting up to 50g per kilometre join the main pool at 14%, and anything above that figure, meaning most petrol and diesel models, goes into the special rate pool at 6%. Relief on a conventional company car therefore trickles out over many years rather than arriving in one go.