Capital allowances - enable businesses to write off the cost of assets against taxable income.

Annual Investment Allowance (AIA) - The first £200,000 of annual investment in plant and machinery is allowed at 100%.  This is for 12-month periods from 1 January 2016.

Periods from Annual limit
1/6 April 2014 £500,000
1 January 2016 £200,000

Writing down allowance (WDA) - If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for. The 3 types of pool are the main pool with a rate of 18%, the special rate pool with a rate of 8% and single asset pools with a rate of 18% or 8% depending on the item. Add items you’ve claimed annual investment allowance (AIA) or first year allowances on to the pool they qualify for. The value you add for them is zero. For first year allowances you don’t pool them until the year after you claim for them.

Enhanced Capital Allowances (ECA) - You can claim ‘enhanced capital allowances’ (a type of first year allowances) for energy and water efficient equipment including some cars with low CO2 emissions, energy saving equipment that’s on the energy technology product list, eg certain motors and new zero-emission goods vehicles.

Electric Vans - 100% capital allowance for new vans which don't produce CO2 emissions.

Short-life assets - Capital allowances on these can be calculated in separate single asset pools.

  • Rates for Cars - bought 1 April 2015 - 31 March 2018:

    Cars are not eligible for the AIA, so usually only benefit from WDA (vehicles which are not classed as cars are eligible for the AIA). The rate you can claim depends on the CO2 emissions of your car and the date you bought it. The main and special rates apply from 1 April for limited companies, and 6 April for sole traders and partners. The first year allowances rate applies from 1 April for all businesses. (Any cars used by the self employed where there is part non-business use will be separately allocated to a single asset pool with the annual allowance either 18% or 8% depending on the CO2 emissions. The available allowance will be restricted for the private use element)

    Description of car What you can claim
    New and unused, CO2 emissions are 75g/km or less (or car is electric) First year allowances - you can deduct the full cost from your profits before tax. You can claim first year allowances in addition to annual investment allowance - they don’t count towards your AIA limit.
    New and unused, CO2 emissions are between 75g/km and 130g/km Main rate allowances - 18%
    Second hand, CO2 emissions are 130g/km or less (or car is electric) Main rate allowances - 18%
    New or second hand, CO2 emissions are above 130g/km Special rate allowances - You have to claim a lower rate of 8% on cars with CO2 emissions of more than 130g/km
  • Rates for Cars - bought 1 April 2018 - 31 March 2021:

    Description of car What you can claim
    New and unused, CO2 emissions are 50g/km or less (or car is electric) First year allowances - you can deduct the full cost from your profits before tax. You can claim first year allowances in addition to annual investment allowance - they don’t count towards your AIA limit.
    New and unused, CO2 emissions are between 51g/km and 110g/km Main rate allowances - 18%
    Second hand, CO2 emissions are 110g/km or less (or car is electric) Main rate allowances - 18%
    New or second hand, CO2 emissions are above 110g/km Special rate allowances - You have to claim a lower rate of 8% on cars with CO2 emissions of more than 110g/km

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