Definition
Capital allowances are the tax relief a business gets for money spent on assets it keeps and uses, such as equipment, machinery and vans. They are deducted from taxable profit in place of the depreciation shown in the accounts.
Why they exist
The cost of an asset the business keeps is not deducted as an expense, and depreciation is not allowed for tax. Capital allowances give the relief instead, at rates set by law, so every business gets the same deduction whatever depreciation policy it uses.
The main allowances for companies
| Allowance | What it gives |
|---|---|
| Annual investment allowance (AIA) | 100% of the cost of most plant and machinery, up to £1 million a year. Not available on cars. |
| Full expensing | 100% of the cost of new main-rate plant and machinery bought by a company, with no upper limit. 50% for special-rate assets. |
| Writing-down allowance | A percentage of the remaining balance each year: 14% on the main pool from 1 April 2026 (18% before) and 6% on the special rate pool. |
| Structures and buildings allowance | 3% a year of the construction cost of qualifying non-residential buildings. |
Cars get writing-down allowances at a rate that depends on their CO2 emissions.
Read more: Capital allowances in Tax Optimiser and The CT600 capital allowances boxes.