| Allowance | Rate | Applies to | Annual limit |
|---|---|---|---|
| Annual Investment Allowance (AIA) | 100% | Most plant and machinery, excluding cars | £1,000,000 |
| Full expensing | 100% | New qualifying plant and machinery (not cars) | Unlimited |
| 50% first year allowance | 50% | New special rate assets, integral features, long-life assets | Unlimited |
| First Year Allowance (zero-emission cars) | 100% | New cars with 0g/km CO2 emissions | Unlimited |
| Writing Down Allowance (main pool) | 18% | Most plant and machinery not covered above, cars 1-50g/km CO2 | None |
| Writing Down Allowance (special rate) | 6% | Integral features, long-life assets, cars over 50g/km CO2 | None |
| Structures and Buildings Allowance (SBA) | 3% | New commercial buildings and structures | None |
Frequently asked questions
The Annual Investment Allowance (AIA) allows you to deduct the full cost of qualifying plant and machinery from your profits in the year of purchase, up to £1,000,000. Most small businesses will never exceed this limit, meaning they can write off all their equipment costs immediately rather than spreading them over several years.
Full expensing, introduced from April 2023, allows limited companies to deduct 100% of the cost of new qualifying plant and machinery from profits in the year of purchase with no annual cap. Unlike the AIA, full expensing has no limit but applies only to new (not second-hand) assets and only to limited companies, not sole traders or partnerships.
Qualifying assets include computers and IT equipment, machinery and tools, vehicles (though cars have specific rules), office furniture, and fixtures in commercial property. Land, buildings themselves, and items with a dual personal and business use may not qualify or may be subject to restrictions.
Cars are excluded from the AIA and full expensing. Instead they go into a special rate pool (6% per year writing down allowance) or main rate pool (18% per year) depending on their CO2 emissions. Electric and zero-emission cars currently qualify for a 100% first year allowance. The business use percentage applies if the car is also used privately.
When you sell a capital allowances asset, a balancing charge or balancing allowance arises. If you receive more than the pool value, a balancing charge adds taxable profit. If you receive less, a balancing allowance gives additional relief. This ensures your total tax relief over the asset's life equals its actual cost minus its disposal value.