Depreciation Calculator
Calculate asset depreciation using straight-line or reducing balance methods with a year-by-year schedule.
Last updated: April 2026 · Source: GOV.UK – Capital Allowances
Annual Depreciation
£1,800.00
| Year | Depreciation | Book Value |
|---|---|---|
| 0 | — | £10,000.00 |
| 1 | £1,800.00 | £8,200.00 |
| 2 | £1,800.00 | £6,400.00 |
| 3 | £1,800.00 | £4,600.00 |
| 4 | £1,800.00 | £2,800.00 |
| 5 | £1,800.00 | £1,000.00 |
Disclaimer
This calculator is provided for informational purposes only and should not be considered as financial or tax advice. All calculations are performed locally in your browser — no personal data is collected or sent to our servers. Rates and thresholds are sourced from HMRC and GOV.UK and are updated for the current tax year. Always verify results with HMRC or consult a qualified professional before making financial decisions.
How It Works
Depreciation systematically allocates the cost of a tangible asset over its useful economic life, reflecting the consumption of its value. Straight-line depreciation uses the formula: Annual charge = (Original cost − Estimated residual value) ÷ Useful life in years. This produces an equal expense each year and is the most common method for UK financial reporting under FRS 102. The net book value (NBV) decreases by the same fixed amount annually until it reaches the residual value.
Reducing-balance (diminishing-balance) depreciation applies a fixed percentage rate to the NBV at the start of each period. The formula is: Annual charge = NBV at start of year × Depreciation rate. This front-loads higher charges in the early years when the asset is most productive, tapering off as the NBV shrinks. To calculate the rate needed to reach a target residual value, use: Rate = 1 − (Residual ÷ Cost)^(1/n), where n is the asset's life in years.
Depreciation is a non-cash accounting entry—it does not directly represent tax relief. For tax purposes, UK businesses claim capital allowances instead, which follow different rules and rates. However, depreciation affects reported profit, balance sheet values, and financial ratios. Companies must disclose their depreciation policies in the notes to accounts. Common useful lives used in practice: computers 3–5 years, vehicles 4–8 years, furniture 5–10 years, buildings 25–50 years.
Straight-line vs reducing-balance on a £12,000 van
- Van cost: £12,000. Residual value: £2,000. Useful life: 5 years.
- Straight-line annual charge: (£12,000 − £2,000) ÷ 5 = £2,000 per year. NBV after year 1: £10,000.
- Reducing-balance rate to reach £2,000 in 5 years: 1 − (2,000/12,000)^(1/5) ≈ 30.1%.
- Year 1 reducing-balance charge: £12,000 × 30.1% = £3,612. NBV after year 1: £8,388.
- Year 2 reducing-balance charge: £8,388 × 30.1% = £2,525. NBV after year 2: £5,863.
Source: GOV.UK – Capital Allowances
Frequently Asked Questions
- What does the Depreciation Calculator do?
- Calculate asset depreciation using straight-line or reducing balance methods with a year-by-year schedule. All calculations are performed in your browser using official UK rates and thresholds.
- Is this suitable for my business?
- This calculator provides general estimates based on standard UK business rates and rules. Every business is different — consult your accountant for advice specific to your circumstances.
- Does this use 2025/26 tax rates?
- Yes. All rates and thresholds are based on the current 2025/26 UK tax year. Corporation Tax main rate is 25% for profits over £250,000, with a 19% small profits rate.