Types of Capital Allowances
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Annual Investment Allowance (AIA)
The AIA offers businesses the chance to claim 100% relief on qualifying capital costs, specifically those related to plant and machinery. The current limit is £1M (since January 2019). It’s pivotal to claim this allowance within the financial year of asset spend.
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Writing-Down Allowance
Should the capital expenditure surpass the AIA limits, or be historic expenditure, businesses can resort to the writing-down allowance, allowing them to deduct a proportion of the asset cost from annual profits. This percentage varies based on the asset type, which must be categorised into pools accordingly.
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First Year Allowance (FYA)
For certain expenditures, businesses can claim 100% of the asset cost in the financial year of purchase under the FYA.
A 100% first year allowance can currently be claimed for electric car charging points, and since 1 April 2023 Full Expensing (FE) has been available (see below). FE replaced super-deduction which had been available until 31 March 2023.
Full Expensing (FE)
FE has been available since 1 April 2023 for companies only, and is available on new general/main pool expenditure only. FE works similar to Annual Investment Allowance but has no upper limit.
Available since 1 April 2021 this allowance allows companies to claim 50% allowances on new integral features and special rate pool expenditure in the year of purchase. The remaining 50% is claimed as writing down allowances.
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Small Pools Allowance
If, after exhausting the writing down allowances, the balance falls under £1,000, a business can claim the entire amount through the small pools allowance.
Latest News
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6 March 2024
Spring Budget 2024: Changes to Capital Allowances
On Wednesday 6th March 2024, Jeremy Hunt, a key figure in fiscal policy, revealed the Spring Budget for the year. This announcement always demands the attention of businesses across sectors. As the dust settles, it becomes important to identify the changes that are going to impact the financial strategies... -
29 February 2024
Capital and Revenue Expenditure: The Tax Implications
In financial management and accounting distinguishing between capital expenditure and revenue expenditure is crucial for accurate financial reporting. This differentiation becomes even more significant when considering tax implications. Especially in the context of capital allowances. Understanding these...
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