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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.
  • 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

Expenditure incurred:

Annual limit

£
From 1 January 2019 to 31 March 2023 1,000,000
From 1 April 2023 200,000

AIA limits – sole traders and partnerships

Expenditure incurred:

Annual limit

£
From 1 January 2019 to 31 March 2023 1,000,000
From 1 April 2023 200,000

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‘.
  • A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.
  • Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from a new FYA. A company will be allowed to claim a super-deduction of 130% on certain new plant and machinery investments that ordinarily qualify for the 18% WDA and a 50% FYA on most new plant and machinery investments that ordinarily qualify for the 6% WDA.

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 2021

Emissions (g/km)

Pool

Allowance

0 Main rate 100% FYA
≤ 50 Main rate 18% 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.

Company Information Walker Thompson is a trading name of Walker Thompson Ltd registered in England and Wales. Company registration number 06574838

Registered Office Empress House :: 43a Binley Road :: Coventry CV3 1HU :: T 024 7663 5522 :: F 024 7663 5518 :: E clientcare@walkerthompson.co.uk