Capital Allowances – Plant and Machinery
- The cost of purchasing capital equipment in a business is not a revenue tax deductible expense. However, tax relief is available on certain capital expenditure in the form of capital allowances.
- Plant and machinery allowances may be available on items such as machines, equipment, furniture, certain fixtures in a building ('integral features'1), computers, cars, vans and similar equipment used in a business.
- There are special rules for cars.
- Plant and machinery allowances may be available to owners of commercial property which is let out to a business.
- The Annual Investment Allowance (AIA) gives a 100% write-off on most types of plant and machinery (but not cars) up to an annual limit.
- Writing down allowances (WDA) are given for expenditure for which AIA is not, or cannot be, claimed.
- A Structures and Buildings Allowance of 3% may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.
AIA
- Special rules apply to accounting periods straddling the dates shown in the tables below.
- The AIA may need to be shared between certain businesses under common ownership.
AIA limits - companies
Expenditure incurred: | Annual limit |
|---|---|
| £ | |
| From 1 January 2019 to 31 March 2023 | 1,000,000 |
| From 1 April 2023 | 200,000 |
AIA limits - sole traders and partnerships
Expenditure incurred: | Annual limit |
|---|---|
| £ | |
| From 1 January 2019 to 31 March 2023 | 1,000,000 |
| From 1 April 2023 | 200,000 |
Other plant and machinery allowances
- Expenditure upon which AIA is not given/claimed will obtain relief through the 'main rate pool2' or the 'special rate pool3' rather than each item being dealt with separately.
- The annual rate of WDA is 18% in the 'main rate pool2' and 6% in the 'special rate pool3'.
- A 100% first year allowance (FYA) may be available on certain cars.
- Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from a new FYA. A company will be allowed to claim a super-deduction of 130% on certain new plant and machinery investments that ordinarily qualify for the 18% WDA and a 50% FYA on most new plant and machinery investments that ordinarily qualify for the 6% WDA.
Cars
- For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.
- AIA is not available on any car but a 100% FYA may be available on certain cars. To qualify for FYA, the car must be purchased new.
Cars acquired from April 2021
Emissions (g/km) | Pool | Allowance |
|---|---|---|
| 0 | Main rate | 100% FYA |
| ≤ 50 | Main rate | 18% WDA |
| >50 | Special rate | 6% WDA |
1 Integral features
FA 2008 introduced a new classification of items in a building or structure, expenditure on the provision or replacement of which qualifies for writing down allowances at the lower rate available for the special rate pool. The main features that are normally integral to a modern building (such as electrical, cold and hot water systems) therefore qualify for plant capital allowances but at the lower rate.
2 Main rate pool
The main rate pool is one of the two general pools into which plant expenditure is allocated (the other being the special rate pool).
3 Special rate pool
The special rate pool is one of the two general pools into which plant expenditure is allocated (the other being the main rate pool). The main items in the special rate pool are integral features and some higher emission cars.
- The cost of purchasing capital equipment in a business is not a revenue tax deductible expense. However, tax relief is available on certain capital expenditure in the form of capital allowances.
- Plant and machinery allowances may be available on items such as machines, equipment, furniture, certain fixtures in a building ('integral features1'), computers, cars, vans and similar equipment used in a business.
- There are special rules for cars.
- Plant and machinery allowances may be available to owners of commercial property which is let out to a business.
- The Annual Investment Allowance (AIA) gives a 100% write-off on most types of plant and machinery (but not cars) up to an annual limit.
- Writing down allowances (WDA) are given for expenditure for which AIA is not, or cannot be, claimed.
- A Structures and Buildings Allowance of 3% may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.
AIA
- Special rules apply to accounting periods straddling the dates shown in the tables below.
- The AIA may need to be shared between certain businesses under common ownership.
AIA limits - companies
Expenditure incurred: | Annual limit |
|---|---|
| £ | |
| From 1 January 2019 to 31 March 2023 | 1,000,000 |
| From 1 April 2023 | 200,000 |
AIA limits - sole traders and partnerships
Expenditure incurred: | Annual limit |
|---|---|
| £ | |
| From 1 January 2019 to 31 March 2023 | 1,000,000 |
| From 1 April 2023 | 200,000 |
Other plant and machinery allowances
- Expenditure upon which AIA is not given/claimed will obtain relief through the 'main rate pool2' or the 'special rate pool3' rather than each item being dealt with separately.
- The annual rate of WDA is 18% in the 'main rate pool2' and 6% in the 'special rate pool3'.
- A 100% first year allowance (FYA) may be available on certain cars.
Cars
- For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.
- AIA is not available on any car but a 100% FYA may be available on certain cars. To qualify for FYA, the car must be purchased new.
Cars acquired from April 2021
Emissions (g/km) | Pool | Allowance |
|---|---|---|
| 0 | Main rate | 100% FYA |
| ≤ 50 | Main rate | 18% WDA |
| >50 | Special rate | 6% WDA |
1 Integral features
FA 2008 introduced a new classification of items in a building or structure, expenditure on the provision or replacement of which qualifies for writing down allowances at the lower rate available for the special rate pool. The main features that are normally integral to a modern building (such as electrical, cold and hot water systems) therefore qualify for plant capital allowances but at the lower rate.
2 Main rate pool
The main rate pool is one of the two general pools into which plant expenditure is allocated (the other being the special rate pool).
3 Special rate pool
The special rate pool is one of the two general pools into which plant expenditure is allocated (the other being the main rate pool). The main items in the special rate pool are integral features and some higher emission cars.