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 Allowance (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 (SBA) 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
- 100% deduction in the year of purchase.
- Available on most plant and machinery.
- Not available for cars.
- Available on both new and second-hand qualifying assets.
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.
A 100% First Year Allowance (FYA) may be available on certain qualifying assets.
| Pool | Rate | Typical Assets |
|---|---|---|
| Main Rate Pool | 14% | General plant, machinery, equipment, vans, cars with CO₂ ≤50g/km |
| Special Rate Pool | 6% | Integral features, long-life assets, cars with CO₂ >50g/km |
Other allowances
| Type | Allowance |
|---|---|
| First Year Allowance (FYA) on certain plant and machinery main rate assets (purchased on or after 1 January 2026) Excludes cars and second-hand assets. |
40% |
| First Year Allowance (FYA) on new zero-emission cars and electric charge points (purchased before 1 April 2027) | 100% |
| Corporation Tax Full Expensing on qualifying new, unused plant and machinery | 100% |
| Corporation Tax FYA on new, unused long-life assets, integral features etc. | 50% |
| Structures and Buildings Allowance (SBA) | 3% |
Cars
Cars have special capital allowance rules.
- AIA is never available for cars.
- 100% FYA is available only for qualifying new zero-emission cars.
Cars acquired before April 2027
| CO₂ emissions (g/km) | Pool | Allowance |
|---|---|---|
| 0 | Main Rate | 100% FYA |
| ≤50 | Main Rate | 14% WDA |
| >50 | Special Rate | 6% WDA |
Quick Exam Cases
| Scenario | Allowance |
|---|---|
| Machine costing £300,000 | 100% AIA |
| Second-hand machine | AIA available (if qualifying) |
| New zero-emission car | 100% FYA |
| Car with CO₂ ≤50g/km | 14% WDA (Main Rate Pool) |
| Car with CO₂ >50g/km | 6% WDA (Special Rate Pool) |
| Electrical system in a building | Special Rate Pool (6%) |
| Company buys new qualifying machinery | 100% Full Expensing |
- AIA = £1,000,000
- AIA = 100%
- Cars never qualify for AIA.
- Main Rate Pool = 14%
- Special Rate Pool = 6%
- SBA = 3%
- New zero-emission car = 100% FYA
- Corporation Tax Full Expensing = 100%
- New qualifying special-rate assets = 50% FYA
- Qualifying main-rate assets purchased on or after 1 January 2026 may qualify for 40% FYA.