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Home › Tax glossary › Capital allowances
UK tax glossaryUpdated October 2026What are capital allowances?
A plain-English explanation from Cangaf's ACCA-qualified accountants, with the 2026/27 rules.
Capital allowances in briefCapital allowances give tax relief when a business buys equipment, machinery, vans or other assets it keeps and uses. Most small businesses get 100% relief in the year of purchase through the £1 million Annual Investment Allowance. Assets not covered are written down over time, at 14% a year in the main pool from April 2026.
Key facts
| Annual Investment Allowance | 100% relief on up to £1 million of qualifying spending a year |
| Full expensing | 100% relief for companies on new main-rate plant and machinery |
| Writing-down allowance | 14% main pool (from April 2026), 6% special rate pool |
| Cars | 100% for new zero-emission cars, otherwise writing-down allowances only |
What qualifies
Tools, computers, machinery, vans, office furniture and fixtures such as heating and lighting systems. Buildings and land don't qualify for plant and machinery allowances, although the Structures and Buildings Allowance may apply.
Cars are different
Cars can't use the Annual Investment Allowance. New zero-emission cars get 100% relief. Other cars go into the main pool (50g/km CO2 or less) or the special rate pool (over 50g/km).
2026 changes
From 1 January 2026, a new 40% first-year allowance applies to new main-rate plant and machinery, including for unincorporated businesses and leasing. The main pool writing-down rate fell from 18% to 14% in April 2026.
Common questions
Can sole traders claim capital allowances?
Yes. Sole traders and partnerships can use the Annual Investment Allowance and the new 40% first-year allowance. Full expensing is only for companies.
Should I claim mileage or capital allowances on my car?
You can't do both for the same car. Mileage is simpler; capital allowances plus actual costs can be better for expensive or electric cars. We compare both.
Do capital allowances apply under the cash basis?
Under the cash basis, most equipment is simply deducted as an expense when you pay for it, but cars still use capital allowances.
Official guidance: Claim capital allowances (GOV.UK)
