Capital Allowance Calculator
Ellie SleightholmUse this capital allowance calculator to work out the tax relief on equipment, vehicles, and machinery your business buys in 2026/27. Enter what you bought, when, and for how much, and it applies the most generous allowance you are entitled to, shows the tax saved at your rate, and maps out the writing-down schedule for anything depreciated over several years.
One clarification before the numbers, because search engines mix these up constantly.
This page
Capital allowances
Tax relief on business assets: vans, machines, computers, and office kits.
Not this page
Capital gains tax allowance
The £3,000 annual exemption on profits from selling shares or property. If you were looking for CGT, that is a different calculation entirely.
Step by step
How to Use This Calculator
- 1
Pick the asset type
Plant and machinery, a van, a car (with its CO₂ figure and whether it is new or used), integral features in a building, or a zero-emission car or charge point.
- 2
Tell it your business structure
Companies get full expensing; sole traders and partnerships do not but usually get the same result through the Annual Investment Allowance.
- 3
Enter the cost and purchase date
The date matters more than usual right now: the main writing-down rate fell from 18% to 14% in April 2026, and a new 40% first-year allowance exists for purchases from 1 January 2026.
- 4
Add your business use percentage
If you are a sole trader using the asset personally too. The claim is restricted to the business share.
- 5
Read the verdict
The calculator picks the best available relief automatically, AIA, full expensing, first-year allowance, or pool; tells you which one it chose and why; and shows the tax saved at your marginal rate, whether that is 19% or 25% corporation tax, the 26.5% marginal band, or income tax with Class 4 on top.
Rates
Capital Allowance Rates for 2026/27
| Allowance | Relief | Who and what qualifies |
|---|---|---|
| Annual Investment Allowance (AIA) | 100% in year one, up to £1 million | All businesses, most plant and machinery, new or used. Not cars. |
| Full expensing | 100% in year one, no cap | Companies only, new and unused plant and machinery. Not cars. |
| 40% first-year allowance | 40% in year one, the rest at 14% | New main rate plant and machinery bought from 1 January 2026. Not cars. |
| 100% first-year allowance | 100% in year one | New zero-emission cars and charge points to 31 March 2027 (5 April 2027 for income tax). |
| Main pool: writing down allowance | 14% a year (was 18% before April 2026) | Plant and machinery not covered above, cars up to 50 g/km CO₂. |
| Special rate pool | 6% a year | Integral features, long-life assets, solar panels, thermal insulation, and cars over 50 g/km. |
| Structures and buildings allowance | 3% a year | Construction and renovation of non-residential buildings. |
New this year
What Changed in 2026
Two changes reshape the numbers this year.
First
The main writing-down rate dropped from 18% to 14% from 1 April 2026 for corporation tax and 6 April 2026 for income tax. Anything sitting in your main pool now unwinds more slowly: relief that used to take about 12 years to reach 90% of the cost now takes around 15. If your accounting period straddles the change date, a hybrid rate applies for that period.
Second
To soften that cut, a new 40% first-year allowance applies to new main-rate plant and machinery bought from 1 January 2026. You deduct 40% of the cost immediately, and the remaining 60% joins the main pool at 14%.
It matters mainly to companies that have used up their full expensing options or businesses past the AIA ceiling, because 100% routes still beat it whenever they are available. The calculator handles that ranking for you.
- To relieve 90% of a main pool cost
- 12 → 15 yrs
- Of a 40% FYA purchase joins the main pool
- 60%
- AIA, unchanged, covering almost every small business
- £1 million
Vehicles
Cars, Vans and Capital Allowances
Vehicles are where capital allowances get genuinely complicated and where the calculator earns its keep.
Vans and lorries count as plant and machinery. They qualify for AIA or full expensing, so a business van normally gets 100% relief in year one.
Second-hand changes the answer. A used electric car does not get the 100% first-year allowance; it goes into the main pool at 14%. First-year allowances and full expensing are for new and unused assets only.
Private use cuts the claim. Sole traders and partners using a vehicle personally must reduce the claim by the private share. Use the car 40% privately and you claim 60% of the allowance.
Cars are the big exception
Cars never qualify for AIA, full expensing, or the 40% first-year allowance. Relief depends on CO₂ emissions:
100%
in year one
New zero-emission car
14%
a year, main pool
Car up to 50 g/km
6%
a year, special rate pool
Anything over 50 g/km
Real numbers
Worked Examples
A £30,000 van, sole trader
AIA · 100% this year
Deducted from profits: £30,000
- Basic rate saving (20% + 6% Class 4)
- 26%
- Higher rate saving
- 42%
- Higher-rate trader saves
- £12,600
The van is plant and machinery, so the AIA covers it: the full £30,000 comes off taxable profits this year.
A £100,000 machine, limited company
Full expensing · 100%
Deducted immediately: £100,000
- At the 25% main rate
- £25,000
- In the 26.5% marginal band
- £26,500
The same purchase second-hand would fall back on the AIA and produce the same relief, which is why the distinction only starts to matter for businesses spending past the £1 million ceiling.
A £40,000 petrol car, 120 g/km
Special rate pool · 6%
Reducing balance each year
- Year one
- £2,400
- Year two
- £2,256
- After a full decade
- Barely half relieved
Over 50 g/km means the special rate pool. The calculator's schedule makes this visible before you buy, which is precisely the moment the electric alternative deserves a second look.
Pools
How Writing Down Allowances Actually Work
Anything not fully relieved in year one goes into a pool, and each year you deduct a percentage of whatever balance remains: 14% for the main pool and 6% for the special rate pool. It is a reducing balance, so the relief shrinks every year and the pool never quite reaches zero on its own.
Two mechanics worth knowing
Small pools allowance
Once a pool balance falls below £1,000, you can write the whole remainder off in one go using the small pool's allowance.
Selling an asset
When you sell an asset, you deduct the sale proceeds from the pool, which can trigger a balancing charge if the pool goes negative.
The calculator's multi-year schedule applies to both.
Questions
Frequently Asked Questions
What are the conditions for claiming capital allowances?
You must carry on a business, the asset must be used in that business, and you must own it rather than lease it. You claim in your self-assessment return if you are a sole trader or partner, or in the company tax return for a company, for the period you bought the asset.
Can I claim capital allowances on my car?
Yes, if you use it in your business, but through the CO₂-based rates rather than the AIA and restricted to your business-use percentage if you are a sole trader. Many sole traders claim the flat rate mileage allowance instead, and you cannot do both, so it is worth comparing before choosing. Once you pick a method for a car, you stick with it for that vehicle.
Can you claim capital allowances on second-hand assets?
Yes. The AIA and writing down allowances both apply to used equipment. What second-hand assets cannot get is full expensing or any first-year allowance, which are reserved for new and unused assets.
Can you claim capital allowances retrospectively?
Partly. You can amend a self-assessment return within 12 months of the filing deadline to add a missed claim. Beyond that, an unclaimed asset's value stays in your pool, so the relief is not lost; it simply starts flowing from a later year through writing down allowances.
Fixtures in purchased property have their own longer claim rules and are worth professional advice. If the reason you are looking back is unfiled returns, our HMRC penalty calculator shows what catching up will cost and how penalties are reduced.
Can you choose not to claim capital allowances?
Yes, and sometimes you should. Claims can be any amount from zero up to the maximum. A sole trader whose profits are already below the personal allowance gains nothing from a claim this year, and holding the value in the pool saves it for a year when it actually cuts tax.
Who cannot claim capital allowances?
The main group is sole traders using cash basis accounting, which has been the default since April 2024.
Under the cash basis, equipment is simply deducted as a normal expense when you pay for it, so capital allowances are not needed, with one exception: cars still use capital allowances even on the cash basis. Employees generally cannot claim them either, and landlords of residential property cannot claim plant and machinery allowances on assets inside a dwelling.
Is there a 4-month rule for capital allowances?
There is no 4-month rule in the capital allowances legislation, despite the phrase circulating online. People usually mean one of three real rules: pre-trading expenditure, which is treated as incurred on your first day of trading if bought up to 7 years before; the 12-month window for amending a return; or the deadline for short-life asset elections. If someone quotes a 4-month deadline at you, ask them for the source.
Is the capital allowance the same as the capital gains tax allowance?
No. Capital allowances reduce your business profits when you buy assets. The capital gains tax annual exempt amount, £3,000, reduces taxable gains when you sell investments or property. The full rules for business asset relief are on GOV.UK's capital allowances guide, and if you are weighing up a company purchase against buying personally, our sole trader vs limited company calculator shows how the structures compare, including full expensing, which only companies get.