Capital allowances and how to claim them.
Capital allowances are the tax deduction for qualifying capital spend. The rules are more generous than most business owners realise, but the relief only arrives if the claim is made, the asset qualifies, and the timing lines up with the accounting period.
Annual Investment Allowance
100% relief on plant and machinery up to £1m a year. The relief most small businesses use.
Jump to section 02Full Expensing
100% relief with no upper limit for companies buying new main-rate plant and machinery. Permanent from 2024.
Jump to section 03Structures and Buildings
A 3% straight-line annual allowance on qualifying commercial construction and improvement costs.
Jump to section 04Cars, vans, integral features
Asset-by-asset rules that often trip up the claim. Getting the pool right is the difference between 6%, 18% and 100% relief.
Jump to sectionAnnual Investment Allowance: the workhorse.
AIA gives a 100% first-year deduction on qualifying plant and machinery, new or used, owned outright or on hire purchase, up to a £1 million cap per accounting period. It is available to companies, partnerships and sole traders. Qualifying expenditure includes tools, equipment, commercial vehicles (vans, not cars), fixtures, office fit-out, and most integral features.
The £1 million cap is shared across associated companies and across groups, which matters for any corporate structure with related entities. For a single-entity SME spending below the cap in a year, AIA does the work of Full Expensing and gives full relief in the year the asset is brought into use.
Full Expensing: uncapped, companies-only.
Full Expensing, made permanent in the 2024 Budget, gives companies an uncapped 100% first-year deduction for qualifying new main-rate plant and machinery. "New" means first-use, not second-hand; "main-rate" excludes cars, integral features and long-life assets. Full Expensing is available only to companies within the charge to Corporation Tax, not to sole traders, partnerships or LLPs.
For special-rate pool items (integral features, long-life assets) purchased new, the 50% first-year allowance applies instead; the remaining 50% goes into the special-rate pool for writing-down allowances at 6%. For most SMEs below £1 million of capital spend, AIA covers the same ground. Full Expensing becomes the workhorse for companies spending above the cap or buying assets where AIA has already been exhausted.
Structures and Buildings Allowance.
SBA is a 3% straight-line allowance on qualifying construction and improvement costs of non-residential buildings and structures. It was introduced in 2018 and runs for roughly 33 years from the date the structure is first brought into non-residential use. Qualifying costs include new builds, extensions, conversions of non-residential space, and some renovation work.
Integral features within a building (electrics, heating, air conditioning) are pulled out of SBA and claimed separately as plant and machinery, usually at a better rate. Getting the split right on a new commercial fit-out is one of the biggest single tax-relief opportunities in a construction project, and is routinely missed where the builder's invoice is not broken down into SBA-eligible and P&M-eligible components.
Cars, vans and integral features.
Cars are treated differently from other plant and machinery. They do not qualify for AIA or Full Expensing. Instead, the rate depends on CO2 emissions: zero-emission cars get 100% first-year allowances, cars at or below 50 g/km go into the main pool at 18%, cars above 50 g/km go into the special-rate pool at 6%. Commercial vans are not cars for this purpose and qualify for AIA in the normal way.
Integral features, electrical systems, cold water, heating, air conditioning, lifts, external solar shading, are specifically identified in the Capital Allowances Act and go into the special-rate pool at 6% writing-down allowance. They can qualify for AIA at 100% up to the £1 million cap, or for the 50% first-year allowance under Full Expensing. The classification matters: pooling them wrongly costs the claim.
Long-life assets, assets with a useful economic life of 25 years or more, also sit in the special-rate pool. Short-life assets can be elected out of the main pool so that a balancing allowance arises on disposal. The election requires care and is worth the work for high-value, short-hold assets.
Go Deeper
Annual Investment Allowance Guide 2026
How the Annual Investment Allowance works: qualifying expenditure, the £1 million cap, the group-sharing rules, and the pitfalls that cost companies full relief.
GuideCapital Allowances on Cars and Vans: The Full Rules
How capital allowances work for cars, vans and business vehicles, including emissions rules, private use and what company directors should check.
GuideFull Expensing: The Uncapped 100% Relief for Companies
A guide to full expensing for companies buying plant and machinery, including what qualifies, what does not, and where timing matters.
GuideIntegral Features: The Capital Allowances Rules Explained
How integral features allowances apply to lighting, electrical systems, heating and other building fixtures in commercial property.
GuideStructures and Buildings Allowance Guide
How Structures and Buildings Allowance works for commercial property costs, including qualifying spend, claims and record keeping.
Related Tools & Services
Major capital spend planned?
We check the relief, AIA, Full Expensing, SBA, first-year allowances on cars, compare the before-and-after CT position, and make sure the pool classification is right before the CT return is filed.
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