Capital Allowances Calculator UK 2026/27 — AIA, Writing Down & First Year Allowances
Capital allowances let businesses deduct the cost of plant and machinery from taxable profits — but not as a normal business expense. Instead, you claim allowances each year. The Annual Investment Allowance (AIA) gives 100% relief on up to £1,000,000 of qualifying expenditure in the year of purchase. This calculator works out your claim and tax saving.
AIA limit 2026/27: £1,000,000. Main pool WDA: 18%/year. Special rate WDA: 6%/year. Low-emission cars (≤50g/km CO2): 100% FYA. High-emission cars: 6% special rate pool. Full Expensing available for companies on new main rate assets only (no £1m limit). Always seek advice from a qualified accountant before filing.
What Qualifies for Capital Allowances?
Capital allowances are available on plant and machinery — a broad category covering most business assets. Qualifying assets include: computers and IT equipment; machinery and tools; office furniture and fittings; vans and lorries (not cars — which have separate rules); refrigeration units; security systems; and more. They do not apply to land, buildings (except certain fixtures), or stock-in-trade.
| Asset type | Allowance | Rate / limit |
|---|---|---|
| Most plant and machinery (new or second-hand) | Annual Investment Allowance | 100% up to £1,000,000 |
| New main rate assets — companies only | Full Expensing | 100% (no limit) |
| Excess above AIA — main rate | Writing Down Allowance | 18%/year on reducing balance |
| Special rate assets (integral features, etc.) | Writing Down Allowance | 6%/year on reducing balance |
| New special rate assets — companies only | 50% First Year Allowance | 50% in year 1, then 6% WDA |
| Low-emission cars (≤50g/km CO2) | First Year Allowance | 100% in year of purchase |
| Higher-emission cars (>50g/km CO2) | Special rate pool WDA | 6%/year |
The Super-Deduction (Ended April 2023)
The 130% super-deduction for companies ended on 31 March 2023 and was replaced by Full Expensing. If you have any assets acquired under the super-deduction still in pool calculations, seek accountant advice on the interaction with disposal rules.
Structures and Buildings Allowance (SBA)
While capital allowances do not apply to buildings in general, the Structures and Buildings Allowance gives 3% per year (straight line) on the cost of constructing, converting, or renovating non-residential buildings and structures. This is separate from plant and machinery allowances. The SBA can be claimed on commercial buildings bought from April 2020 onwards.
How the Annual Investment Allowance Actually Works
The Annual Investment Allowance (AIA) lets businesses deduct the full cost of most qualifying plant and machinery from their taxable profits in the same year it was bought, up to a generous annual limit — currently £1 million. This is a significant cash-flow advantage over the alternative main rate pool, which only allows an 18% writing-down allowance each year (meaning it takes many years to fully relieve the cost of an asset). For most small and medium-sized businesses, annual capital spending rarely exceeds the £1 million AIA limit, so in practice the vast majority of qualifying equipment purchases can be fully expensed in the year of purchase, making the choice between AIA and the slower pooled allowances largely academic unless you're a larger business making substantial capital investments in a single accounting period.
Full Expensing for Companies
Since April 2023, companies (though not sole traders or partnerships, who remain reliant on AIA) have also been able to claim Full Expensing — a 100% first-year deduction for qualifying new and unused main rate plant and machinery, with no upper limit on the amount that can be claimed, unlike the capped AIA. This effectively replaced the earlier super-deduction scheme and was made permanent in the Autumn Statement 2023, giving companies long-term certainty rather than a time-limited incentive. Full Expensing only applies to genuinely new and unused assets bought by a company — second-hand equipment, and purchases made by unincorporated businesses, still rely on AIA or the standard pooled writing-down allowances instead.
Frequently Asked Questions
Yes. Vans (commercial vehicles not primarily designed for carrying passengers) qualify for AIA. Cars do not qualify for AIA — they go into the main rate or special rate pool depending on CO2 emissions, or qualify for 100% FYA if low-emission. HMRC distinguishes cars from vans based on design, not what you use them for. A double-cab pick-up can be a van or a car depending on payload — above 1 tonne payload it is a van.
When you sell an asset on which you claimed AIA or Full Expensing, a balancing charge arises — you add the proceeds to your pool or, if you claimed 100% in year one, the full disposal proceeds are treated as taxable income. This claws back some of the allowance claimed. Keep records of what you paid and received for all capital assets.
Yes — capital allowances aren't limited to limited companies. Sole traders and partnerships can claim the Annual Investment Allowance and the standard writing-down allowances on qualifying plant and machinery in exactly the same way, deducting the allowance from their trading profits before calculating Income Tax and Class 4 National Insurance. The main difference is that Full Expensing (the 100% first-year deduction introduced in 2023) is only available to companies paying Corporation Tax — unincorporated businesses rely on AIA instead, which for most smaller traders achieves a very similar practical outcome.
Any qualifying spending above the £1 million AIA limit in a single year falls back into the standard capital allowances pools — the main rate pool (18% writing-down allowance per year) or the special rate pool (6% per year) depending on the type of asset. This means the excess is still relieved against tax, just more gradually over several years rather than all at once, so exceeding the AIA limit doesn't mean losing the relief, only delaying when you receive it.