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 Allowances (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.

Structures and Buildings Allowance is introduced from 29 October 2018 at a rate of 2% on a straight line basis.

AIA

Special rules apply to accounting periods straddling the dates shown in the tables below.

The AIA may need to be shared between certain businesses under common ownership.

AIA limits - companies:

Expenditure incurred Annual limit (£)
From 1 January 2016 to 31 December 2018 200,000
From 1 January 2019 1,000,000

AIA limits - sole traders and partnerships:

Expenditure incurred Annual limit (£)
From 1 January 2016 to 31 December 2018 200,000
From 1 January 2019 1,000,000

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 18% in the main rate pool and 6% in the 'Special rate pool'. The 8% WDA is reduced to 6% from April 2019. Special rules apply to accounting periods straddling this date.

A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.

Cars

For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.

AIA is not available on any car but a 100% first year allowance may be available on certain cars. To qualify for first year allowance, the car must be purchased new.

Cars acquired from April 2018:

Emissions (g/km) Pool Allowance
≤ 50 Main rate 100% FYA
≤ 110 Main rate 18% WDA
> 110 Special rate 6% WDA
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