Capital allowances – plant and machinery
- 2020/21
- 2019/20
2020/21
- 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‘), computers, cars, vans and similar equipment used in a business.
- There are special rules for cars and certain ‘environmentally friendly’ equipment.
- 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% (2% prior to April 2020) may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.
2019/20
- 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 ‘), computers, cars, vans and similar equipment used in a business.
- There are special rules for cars and certain ‘environmentally friendly’ equipment.
- 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.
- Structures and Buildings Allowance is introduced from 29 October 2018 at a rate of 2% on a straight line basis.
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 2016 to 31 December 2018 | 200,000 |
| From 1 January 2019 | 1,000,000 |
AIA limits – sole traders and partnerships
Expenditure incurred: |
Annual limit |
|---|---|
| £ | |
| From 1 January 2016 to 31 December 2018 | 200,000 |
| From 1 January 2019 to 31 December 2020 | 1,000,000 |
Other plant and machinery allowances
- Expenditure upon which AIA is not given/claimed will obtain relief through the ‘ main rate pool ‘ or the ‘ special rate pool ‘ rather than each item being dealt with separately.
- The annual rate of WDA is 18% in the ‘main rate pool‘ and 6% in the ‘special rate pool‘. The 8% WDA is reduced to 6% from April 2019. Special rules apply to accounting periods straddling this date.
- A 100% first year allowance (FYA) may be available on certain energy efficient plant and 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% first year allowance may be available on certain cars. To qualify for first year allowance, the car must be purchased new.
Cars acquired from April 2018
Emissions (g/km) |
Pool |
Allowance |
|---|---|---|
| ≤50 | Main rate | 100% FYA |
| ≤ 110 | Main rate | 18% WDA |
| >110 | Special rate | 6% WDA |