- 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 of 3% may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.
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
Annual limit |
|---|
| £ |
| 1,000,000 |
AIA limits – sole traders and partnerships
Annual limit |
|---|
| £ |
| 1,000,000 |
Other plant and machinery allowances
2026/27
- 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 for chargeable periods which straddle those dates.
- A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.
2025/26
- 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’.
- A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.
Other allowances
2026/27
| First Year Allowance (FYA) on certain plant and machinery main rate assets (if purchased on or after 1 January 2026)
Exclusions apply including cars and second-hand assets |
40% |
| First Year Allowance (FYA) on new zero emission cars and electric charge points (if purchased 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, integral features of buildings, etc. | 50% |
2025/26
| First Year Allowance (FYA) on certain plant, machinery and cars of 0g/km (for cars purchased before 1 April 2026) | 100% |
| Corporation tax FYA (‘full expensing’) on certain new, unused plant and machinery | 100% |
| Corporation tax FYA on new, unused long-life assets, integral features of buildings, etc. | 50% |
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 before April 2027
Emissions (g/km) |
Pool |
Allowance |
|---|---|---|
| 0 | Main rate | 100% FYA |
| ≤ 50 | Main rate | 14% WDA |
| >50 | Special rate | 6% WDA |
Disclaimer
This publication is published for the information of clients. It provides only an overview of the regulations in force at the date of publication and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this publication can be accepted by the authors or the firm.