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Join UsCall UsCapital allowances provide tax relief by allowing the cost of certain business assets, such as equipment and machinery, to be deducted from taxable profits.
Different types of allowances apply, including the Annual Investment Allowance, which permits most businesses to deduct qualifying expenditure up to a set limit.
Capital allowances reduce taxable profits rather than being a direct cash payment and are subject to specific rules and limits.
| Description | 2023/2024 | 2024/2025 | 2025/2026 | 2026/2027 |
|---|---|---|---|---|
| Annual Investment allowance (AIA) of 100% on expenditure up to ... | £1m | £1m | £1m | £1m |
| Main writing down allowance rate [1] | 18% | 18% | 18% | 18% |
| Special rate pool [1,2] | 6% | 6% | 6% | 6% |
| Expenditure on plant and machinery for use in designated assisted areas [3,5] | 100% | 100% | 100% | 100% |
| Enchanced Capital allowances on qualifying plant and machinery in freeport tax sites [4,5] | 100% | 100% | 100% | 100% |
| Enchanced Capital allowances on qualifying plant and machinery in investment zone tax sites [4,5] | 100% | 100% | 100% | 100% |
1. Reducing balance. New rate from 1 April 2026 for businesses within the charge to Corporation Tax and 6 April 2026 for business within the charge to Income tax.
2. Applies to long-life assets, integral features, thermal insulation, solar panels and cushion gas.
3. Allowances available until the later of 31 March 2021 and the eighth anniversary of an area being designated. Expenditure must be on new (unused) plant or machinery for use primarily in designated assisted areas. Expenditure must not be replacement expenditure.
4. Allowances available on expenditure incurred on or before 30 September 2031 in England and 30 September 2034 in Scotland and Wales. Expenditure must be on new (unused) plant or machinery for use primarily in a freeport tax site.
5. Only available to companies within the charge to corporation tax.
| Description | Before 1 April 2021 | On or after 1 April 2021 |
|---|---|---|
| Zero Emission [2] | 100% | 100% |
| Low Emisson less than or qual to 50g/km | 100% | 18% [1] |
| Emissions between 50g/km and or equal to 110g/km (1) | 18% | 6% |
| Emissions between 50g/km and or equal to 110g/km (1) | 6% | 6% |
1. Writing down allowances are given at the rate of 18% (14% from April 2026) or 6% on a reducing balance basis.
2. The car must be unused and not second-hand.
3. 1 April 2021 for corporation tax and 6 April 2021 for income tax.
| Description | 2023/2024 | 2024/2025 | 2025/2026 | 2026/2027 |
|---|---|---|---|---|
| Structures and buildings allowance (1,2) | 3% | 3% | 3% | 3% |
| Structures and buildings allowance in freeport tax sites (1,3) | 10% | 10% | 10% | 10% |
| Structures and buildings allowance in investment zone tax sites (1,3) | 10% | 10% | 10% | 10% |
1. Straight line basis.
2. This allowance applies to expenditure under physical construction works entered into on or after 29 October 2018.
3. This rate applies where the first contract for construction in entered into on or after the date the tax site is designated. The building or structure must be brought into qualifying use before 1 October 2031 in England and 30 September 2034 for Scotland and Wales.
| Description | 2023/2024 | 2024/2025 | 2025/2026 |
|---|---|---|---|
| Research and development allowances | 100% | 100% | 100% |
1. This allowance provides relief for capital expenditure on research and development incurred by a trader. Allowances are only due if the research and development is related to the trade that the trader carries on. The allowance can be claimed on plant and machinery and structures and buildings, but not in relation to land or rights over land.
| Description | 2023/2024 | 2024/2025 | 2025/2026 | 2026/2027 |
|---|---|---|---|---|
| New plant and machinery in main pool (1) | 100% | 100% | 100% | 100% |
| New plant and machinery in special rate pool (1) | 50% | 50% | 50% | 50% |
1. Only available for companies on qualifying expenditure on unused (not second hand) plant and machinery.
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