Capital allowances — UK rates and thresholds

Capital allowances explained

Capital allowances let a business deduct the cost of qualifying equipment, vehicles and certain building features from its taxable profits. The Annual Investment Allowance gives immediate relief up to a limit, and full expensing and first-year allowances can give 100% relief on qualifying assets. The tables above show the current limits.

Claiming everything you are entitled to — especially on fit-outs and machinery — can materially cut your tax bill. Our compliance and consultancy services make sure nothing is missed.

Not everything you buy is an expense

Day-to-day costs are deducted from profit in the year. Things that last — equipment, machinery, vehicles, fixtures — are capital, and relief comes through capital allowances instead. Getting the split wrong in either direction produces a return that is straightforwardly incorrect.

The annual investment allowance lets most businesses write off qualifying spend in full in the year it happens, up to a limit. Above it, or for assets outside it, relief is spread at a writing-down rate over years.

The categories that catch people

Cars are treated separately and by emissions rather than by cost, so an ordinary company car can be relieved very slowly. Integral features of a building — heating, lighting, electrical and water systems, lifts — sit in their own pool with a lower rate. And the structure of a building itself is outside capital allowances almost entirely, with only a slow separate allowance available.

This is why a fit-out invoice should be itemised while the work is happening. The split between structure, integral features and loose equipment decides whether the relief arrives this year or over decades, and it cannot be reconstructed convincingly from a single total afterwards.