In this guide
What capital allowances are
Capital allowances are tax deductions for qualifying capital spending, such as equipment and machinery, rather than day-to-day running costs. Companies claim them in the Company Tax Return; sole traders and partnerships claim them in their Self Assessment return.
Annual Investment Allowance
AIA lets you deduct the full value of most qualifying plant and machinery from taxable profits, up to £1 million. Business cars do not qualify for AIA.
Short accounting periods can reduce the maximum allowance. Check the purchase date and the accounting period before you claim.
Full expensing and first-year allowances
Companies can claim full expensing on qualifying plant and machinery bought for use in the business, subject to the rules. A 40% first-year allowance applies to qualifying main-rate plant and machinery purchased after 1 January 2026.
Each allowance has its own conditions. Check the asset and purchase date before recording a claim.
What does not qualify
Business cars, assets bought before the business started using them, gifted assets and items used outside the business may need a different treatment. Buildings, land and structures follow separate rules.
Where a sole trader or partner also uses an asset privately, the allowance is restricted to the business-use share.
Records to keep
Keep the invoice, contract, payment date, asset description, business-use details and evidence of when the asset came into use. Record disposals because a later sale can create a balancing adjustment or tax charge.
Official sources
Rates and deadlines can change. Use these links to check a rate, deadline or eligibility rule.
Planning an equipment purchase?
We can review the proposed asset, ownership structure and likely tax treatment before you commit.
Discuss capital expenditure