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鈥榃riting down allowances鈥� are one type of capital allowance. They let you deduct a percentage of the value of certain items from your profits each year.

You might be able to claim more tax relief if you can use one of the other capital allowances, for example:

• annual investment allowance (AIA)

• 100% first year allowances

• temporary first year allowances

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

To claim writing down allowances, group items into pools depending on which rate they qualify for. You must work out how much you can claim separately for each pool.

The 3 types of pool are the:

• main pool with a rate of 18%
• special rate pool with a rate of 6%
• single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

You can claim 18% tax relief on all 鈥�plant and machinery鈥� you buy, unless the items need to go into:

• the special rate pool
• a single asset pool (for example, because you have chosen to treat them as 鈥榮hort life鈥� assets or you鈥檝e used them outside your business)

Special rate pool

You can only claim 6% tax relief on:

• parts of a building considered integral - known as 鈥榠ntegral features鈥�
• items with a long life
• solar panels
• thermal insulation you鈥檝e added to a building
• cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

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

Buildings

You cannot claim the full 6% rate on buildings themselves. You may be able to claim an allowance of 3% on money you spend on buying, constructing or renovating some non-residential buildings.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

If the value of all long-life items you buy in an accounting period is more than 拢100,000, put the costs in the special rate pool.

If the value totals 拢100,000 or less, put the costs in the main rate pool unless there鈥檚 another factor that would qualify it as special rate - for example, it鈥檚 an integral feature.

This 拢100,000 limit is adjusted if your accounting period is more or less than 12 months.

If you鈥檙e in a partnership where one or more of the members is a limited company (not an individual), put all costs of long-life items in the special rate pool.

Single asset pools

You might need to create one or more separate pools for single assets that:

• have a short life (for assets you鈥檙e not going to keep for a long time)
• you use outside your business if you鈥檙e a sole trader or in a partnership

Short life assets

It鈥檚 up to you to decide whether you want to treat something as a short life asset. You cannot include:

• cars
• items you also use outside your business
• special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you鈥檙e still using the item after 8 years.

Let HMRC know

Let HM Revenue and Customs (HMRC) know on your tax return if you鈥檙e a limited company and you decide to create a short life asset pool. You must do this within 2 years of the end of the tax year when you bought the item.

Let HMRC know in writing if you鈥檙e a sole trader or in a partnership - include how much the item cost and when you acquired it. The deadline is the online filing deadline (31 January) for the tax year after the one you bought the item in.

Things you also use outside your business

If you use an item outside your business and you鈥檙e a sole trader or in a partnership, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you鈥檝e claimed AIA or first year allowances on

Record any items you鈥檝e claimed annual investment allowance (AIA) or first year allowances on in the pool they qualify for. If you claim the full cost of an item you鈥檒l need to write down their value as zero. This will help you to work out whether you owe tax if you sell the asset.

What you can claim under writing down allowances depends on what 鈥榩ool鈥� you put an asset in. Each pool has a different rate.

Work out your allowance

Work out what you can claim separately for each pool.

1. Take your closing balance from your last accounting period.

2. Add the value of anything you鈥檝e bought or been given in the current period that qualifies for this pool. Only include VAT if you鈥檙e not VAT registered.

3. Deduct the value of anything you sold or 鈥榙isposed of鈥� that originally qualified for this pool.

4. Work out how much you can claim using the correct rate for that pool.

5. Deduct the amount you can claim from the pool to get the closing balance. This is known as the 鈥榯ax written down value鈥�.

6. Use the amount left in each pool as the opening balance for the next accounting period.

Example

Items you use outside your business

For items that are in a single asset pool because you鈥檝e used them outside your business, reduce the amount you can claim by the amount you use them privately.

You still deduct the full amount from your pool to get the closing balance.

Example

Items you use privately that are not in a single asset pool

If you start using something outside your business that you鈥檝e already claimed capital allowances on:

• add the market value of the item (the amount you鈥檇 expect to sell it for) to a single asset pool
• deduct the same amount from the pool it was in

If the amount you deduct is more than the balance in the pool, the difference is a 鈥榖alancing charge鈥� - you must put it on your tax return.

Claiming less than you鈥檙e entitled to

You do not have to claim the full amount you鈥檙e entitled to. If you only claim part, the rest stays in your closing balance.

If you have 拢1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is 拢1,000 or less before you work out your allowance.

This is called a small pools allowance. It does not apply to single asset pools. You can either claim a small pools allowance or writing down allowances - you cannot claim both.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.