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Tax relief for capital allowances

You deduct capital allowances from your taxable income - so you pay less tax. The allowances cover items that you have to provide so that you can do your work. The deductions are to recognise that assets or equipment lose value as a result of general wear and tear - or depreciation.

Broadly speaking, anything that you have to use in your work that's likely to last for at least two years may be covered by capital allowances.

There are some exceptions - cars, vans, motorcycles and cycles don't count.

You can go back several years to get the relief - the time you've got depends on whether you've previously sent in a Self Assessment tax return.

Calculating capital allowances

There are a number of ways that you can claim capital allowances:

100 per cent first year allowances - for investments in green technologies.

Annual Investment Allowance (AIA) - you can claim AIA on any purchase of equipment (but not motor vehicles) made on or after 6 April 2023 up to an annual amount of £100,000. If the total expenditure is £100,000 or less, you can claim 100 per cent of that whole amount as your AIA.

Writing down allowances - you claim these on the cost of assets you've bought during the year for which you haven't claimed first year allowances. Add to this the value you've carried forward from last year of assets that you have claimed first year allowances on. This total amount is called a 'pool' - you can claim 25 per cent of this amount every tax year. The pool's value is reduced by that 25 per cent - but you can add the value of new assets you buy.

Small pools allowance - you can write off the whole balance in a pool where the pool’s value is not more than £1,000.

You can use either first year allowances or writing down allowances - or both.

• Download 'Helpsheet 252 - Capital allowances and balancing charges' (PDF, 175K) Opens new window

• Help with PDF files

What if the cost of the asset is small

Instead of asking for capital allowances on the cost of an asset you buy, you might be able to get tax relief on the full cost. This will apply if:

• the asset's cost is small
• the item in question replaces something for which you haven't previously had capital allowances

The sort of things this would apply to include small tools and protective or specialist clothing.

• More information on tax relief for specialist tools or clothing

How to get tax relief

To find out how you can get tax relief for capital allowances follow the link below 'How to get allowances and reliefs - employees or directors'.

If you haven't completed a tax return you've got five years from the 31 October following the end of the year concerned to ask for tax relief. If you've previously completed a return it's five years from 31 January following the end of the year concerned.

• How to get allowances and reliefs - employees or directors

More useful links

• Tax allowances and reliefs - more information

• Tax allowances and reliefs - employees or directors

Useful contacts

• Money, tax and benefits contacts

• National Insurance Contributions Office