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Capital allowances are a type of tax relief for businesses. They let you deduct some or all of the value of an item from your profits before you pay tax.

You can claim capital allowances on:

• equipment
• machinery
• business vehicles, for example vans, lorries or business cars

These are known as 鈥榩lant and machinery鈥�.

If you鈥檙e a sole trader or partnership and have an income of 拢150,000 or less a year, you may be able to use a simpler system called cash basis instead.

Types of capital allowances for plant and machinery

You can claim different amounts, depending on which capital allowance you use.

The capital allowances (also known as plant and machinery allowances) are:

• annual investment allowance (AIA) - you can claim up to 拢1 million on certain plant and machinery
• 100% first-year allowances - you can claim the full amount for certain plant and machinery in the year that it was bought
• the super-deduction or 50% special rate first-year allowance - you can claim these for certain plant and machinery you buy from 1 April 2021 up to and including 31 March 2023
• full expensing and 50% first-year allowance - you can claim these on qualifying plant and machinery investments from 1 April 2023
• writing down allowances - you can claim these if your plant and machinery does not qualify for AIA or you鈥檝e already claimed the maximum amount

If an item qualifies for more than one capital allowance, you can choose which one to use.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you鈥檇 expect to sell it for) instead if:

• you owned it before you started using it in your business
• it was a gift

Other business costs

You claim for the cost of things that are not business assets in a different way. This includes:

• your business鈥檚 day-to-day running costs
• items that it鈥檚 your trade to buy and sell
• interest payments or finance costs for buying assets

Claim these costs as business expenses if you鈥檙e a sole trader or partnership, or deduct from your profits as a business cost if you鈥檙e a limited company.

Other capital allowances

As well as plant and machinery, you can also claim capital allowances for:

• renovating business premises in disadvantaged areas of the UK
• extracting minerals
• research and development
• 鈥榢苍辞飞-丑辞飞鈥� (intellectual property about industrial techniques)
• patent rights
• dredging allowances
• structures and buildings

If you let out residential property

You can only claim for items to be used in residential property if your business qualifies as a furnished holiday lettings business. In each year the property must be:

• available for holiday letting for 210 days
• let for 105 days or more

You can claim capital allowances on items that you keep to use in your business - these are known as 鈥榩lant and machinery鈥�.

In most cases you can deduct the full cost of these items from your profits before tax using annual investment allowance (AIA).

What does not count as plant and machinery

You cannot claim plant and machinery allowances on:

• things you lease (unless you have a hire purchase contract or long funding lease) - you must own them
• items used only for business entertainment, for example a yacht or karaoke machine
• land
• structures, for example bridges, roads, docks
• buildings, including doors, gates, shutters, mains water and gas systems

You may be able to claim structures and buildings allowance on structures and buildings.

What counts as plant and machinery

Plant and machinery includes:

• items that you keep to use in your business, including cars
• costs of demolishing plant and machinery
• parts of a building considered integral, known as 鈥榠ntegral features鈥�
• some fixtures, for example fitted kitchens or bathroom suites
• alterations to a building to install plant and machinery - this does not include repairs

Integral features

Integral features are:

• lifts, escalators and moving walkways
• space and water heating systems
• air-conditioning and air cooling systems
• hot and cold water systems (but not toilet and kitchen facilities)
• electrical systems, including lighting systems
• external solar shading

Fixtures

You can claim for fixtures, for example:

• fitted kitchens
• bathroom suites
• fire alarm and CCTV systems

When you buy a building from a previous business owner you can only claim for integral features and fixtures that they claimed for.

You must agree the value of the fixtures with the seller. If you do not you cannot claim for them. Agreeing the value also means the person selling the assets can account correctly for them.

If you let residential property

You can only claim for items to be used in residential property if either:

• you run a furnished holiday lettings business
• the item is to be used in the common parts of a residential building, for example a table in the hallway of a block of flats

Care workers

There are special rules if you run a care business.

You can deduct the full value of an item that qualifies for annual investment allowance (AIA) from your profits before tax.

What you can claim on

You can claim AIA on most plant and machinery up to the AIA amount.

What you cannot claim on

You cannot claim AIA on:

• business cars

• items you owned for another reason before you started using them in your business

• items given to you or your business

Claim writing down allowances instead.

The AIA amount

The AIA amount is 拢1 million.

Changes to the AIA

The AIA amount has changed several times since April 2008.

If the AIA changed in the period you鈥檙e claiming for, you need to adjust the amount you claim.

AIA	Sole traders/partnerships	Limited companies
拢1 million	From 1 January 2019	From 1 January 2019
拢200,000	1 January 2016 - 31 December 2018	1 January 2016 - 31 December 2018
拢500,000	6 April 2014 - 31 December 2015	1 April 2014 - 31 December 2015
拢250,000	1 January 2013 - 5 April 2014	1 January 2013 - 31 March 2014
拢25,000	6 April 2012 - 31 December 2012	1 April 2012 - 31 December 2012
拢100,000	6 April 2010 - 5 April 2012	1 April 2010 - 31 March 2012
拢50,000	6 April 2008 - 5 April 2010	1 April 2008 - 31 March 2010

You get a new allowance for each accounting period.

If your accounting period is more or less than 12 months

Adjust your AIA if your accounting period is more or less than 12 months.

For example

The rules are different if your accounting period is longer than 18 months or you have a gap or overlap between accounting periods.

When you can claim

You can only claim AIA in the period you bought the item.

The date you bought it is:

• when you signed the contract, if payment is due within less than 4 months

• when payment鈥檚 due, if it鈥檚 due more than 4 months later

If you buy something under a hire purchase contract you can claim for the payments you have not yet made when you start using the item. You cannot claim on the interest payments or charges.

If your business closes, you cannot claim AIA for items bought in the final accounting period. Instead, you need to enter a balancing charge or a balancing allowance on your tax return for the year you close your business. Read more about how to claim capital allowances.

If you do not want to claim the full cost

If you do not want to claim the full cost, for example you have low profits, you can claim:

• writing down allowances instead

• part of the cost as AIA and part as writing down allowances

Items you also use outside your business

You cannot claim the full value of items you also use outside your business if you鈥檙e a sole trader or partnership. Reduce the capital allowances you claim by the amount you use the asset outside your business.

For example

If you spend more than the AIA amount

Claim writing down allowances on any amount above the AIA. If a single item takes you above the AIA amount you can split the value between the types of allowance.

Mixed partnerships

AIA is only available for partnerships where all the members are individuals.

More than one business or trade

If you鈥檙e a sole trader or a partnership and you have more than one business or trade, each business usually gets an AIA.

You only get one AIA if the businesses are both:

• controlled by the same person

• in the same premises or have similar activities

If 2 or more limited companies are controlled by the same person they only get one AIA between them. They can choose how to share the AIA.

How to claim

Claim on your tax return. Read more about how to claim capital allowances.

If you buy an asset that qualifies for 100% first-year allowances you can deduct the full cost from your profits before tax.

What qualifies

You can claim 鈥榚nhanced capital allowances鈥� (a type of 100% first-year allowance) for the following equipment, which must be new and unused:

• electric cars and cars with zero CO2 emissions
• plant and machinery for gas refuelling stations, for example, storage tanks, pumps and refuelling equipment for gas, biogas and hydrogen
• zero-emission goods vehicles
• equipment for electric vehicle charging points
• plant and machinery for use in a special tax site in UK Freeports or Investment Zones, if you鈥檙e a company

If you鈥檙e a company investing in plant or machinery

You may be able to claim full expensing or the 50% first-year allowance as well. But you cannot claim more than one allowance against the same expenditure.

How to claim

Claim on your tax return.

If you do not claim all the 100% first-year allowances you鈥檙e entitled to, you can claim the part of the cost you have not claimed using writing down allowances.

Only companies can claim the super-deduction and 50% special rate temporary first-year allowances.

You can claim them against the cost of certain plant and machinery. It must:

• have been bought from 1 April 2021 up to and including 31 March 2023

• be new and unused

You cannot claim both allowances against the same expenditure.

What you can get

The super-deduction lets you deduct up to 130% of the cost from your profits before tax.

50% special rate first-year allowance lets you deduct 50% of the cost from your profits before tax.

Check if you can claim

Check if you can claim the super-deduction or 50% special rate first-year allowance.

You can claim on your Company Tax Return.

Only companies can claim full expensing and the 50% first-year allowance.

You can claim them against the cost of certain plant and machinery. It must:

• have been bought from 1 April 2023
• be new and unused

You cannot claim both allowances against the same expenditure.

What you can get

Full expensing lets you deduct 100% of the cost of qualifying plant and machinery from your profits before tax in the year it was bought.

The 50% first-year allowance lets you deduct 50% of the cost from your profits before tax in the year it was bought.

Check if you can claim

Check if you can claim the full expensing or 50% first-year allowance.

You can claim on your Company Tax Return.

You can claim capital allowances on cars you buy and use in your business. This means you can deduct part of the value from your profits before you pay tax.

Use writing down allowances to work out what you can claim.

Cars do not qualify for annual investment allowance, super-deduction, full expensing or 50% first-year allowances.

Sole traders and partnerships

You can claim simplified mileage expenses on business vehicles instead, if you鈥檙e either:

• a sole trader
• a partnership that has no company partners

You cannot claim simplified mileage expenses if you鈥檝e already claimed for the vehicles in another way.

Employees

If you鈥檙e an employee you cannot claim capital allowances for cars, motorbikes and bicycles you use for work, but you may be able to claim for business mileage and fuel costs.

What counts as a car

For capital allowances a car is a type of vehicle that:

• is suitable for private use - this includes motorhomes
• most people use privately
• was not built for transporting goods

What does not count

Because they do not count as cars you can claim annual investment allowance on:

• motorcycles - apart from those bought before 6 April 2009
• lorries, vans and trucks

Rates for cars

You can claim one of the following:

• the full value of the car as 100% first-year allowances
• 18% of the car鈥檚 value (main rate allowances)
• 6% of the car鈥檚 value (special rate allowances)

Read more about main and special rate allowances pools.

Which rate you can claim depends on when you bought the car and its CO2 emissions.

Check your car鈥檚 CO2 emissions.

Main and special rates apply from 1 April for businesses that pay Corporation Tax, and 6 April for businesses that pay Income Tax. The 100% first-year allowances rate applies from 1 April for all businesses.

Cars bought from April 2021

Description of car	What you can claim
New and unused, CO2 emissions are 0g/km (or car is electric)	100% first-year allowances
Second hand electric car	Main rate allowances
New or second hand, CO2 emissions are 50g/km or less	Main rate allowances
New or second hand, CO2 emissions are over 50g/km	Special rate allowances

Cars bought between April 2018 and April 2021

Description of car	What you can claim
New and unused, CO2 emissions are 50g/km or less (or car is electric)	100% first-year allowances
Second hand electric car	Main rate allowances
New or second hand, CO2 emissions are 110g/km or less	Main rate allowances
New or second hand, CO2 emissions are over 110g/km	Special rate allowances

Cars bought between April 2015 and April 2018

Description of car	What you can claim
New and unused, CO2 emissions are 75g/km or less (or car is electric)	100% first-year allowances
Second hand electric car	Main rate allowances
New or second hand, CO2 emissions are 130g/km or less	Main rate allowances
New or second hand, CO2 emissions are over 130g/km	Special rate allowances

Cars bought between April 2013 and April 2015

Description of car	What you can claim
New and unused, CO2 emissions are 95g/km or less (or car is electric)	100% first-year allowances
Second hand electric car	Main rate allowances
New or second hand, CO2 emissions are 130g/km or less	Main rate allowances
New or second hand, CO2 emissions are over 130g/km	Special rate allowances

Cars bought between April 2009 and April 2013

Description of car	What you can claim
New and unused, CO2 emissions are 110g/km or less (or car is electric)	100% first-year allowances
New or second hand, CO2 emissions are 160g/km or less	Main rate allowances
Second hand electric car	Main rate allowances
New or second hand, CO2 emissions are over 160g/km	Special rate allowances

Cars bought before April 2009

Move the balance of any cars bought before April 2009 to your main rate allowances pool when you work out how much you can claim.

If your car does not have an emissions figure:

• use the special rate
• use the main rate if it was registered before 1 March 2001

Using cars outside your business

If you鈥檙e a sole trader or partnership and you also use your car outside your business, work out what you can claim based on the amount of business use.

If your business provides a car for an employee or director you can claim capital allowances on the full cost. You may need to tell HMRC the car is a company benefit if they use it personally.

Claim capital allowances on your:

• Self Assessment tax return if you鈥檙e a sole trader
• partnership tax return if you鈥檙e a partnership
• Company Tax Return if you鈥檙e a limited company - you must include a separate capital allowances calculation

Employees must claim in a different way.

If you used writing down allowances, you鈥檒l need to work out how much you can claim based on the pool your item is in.

The amount you can claim is deducted from your profits.

When you can claim

You must claim in the accounting period you bought the item if you want to claim:

• annual investment allowance
• 100% first-year allowances
• super-deduction or special rate first-year allowance
• full expensing and 50% first-year allowance

If you do not want to claim the full value you can claim part of it using writing down allowances. You can do this at any time as long as you still own the item.

When you bought it

The date you bought it is:

• when you signed the contract, if payment is due within less than 4 months
• when payment鈥檚 due, if it鈥檚 due more than 4 months later

If you buy something under a hire purchase contract you can claim for the payments you have not made yet when you start using the item. You cannot claim on the interest payments.