Income Tax

Capital allowances

Rates
2019/20
2020/21
2021/22
First year and initial allowances
New unused cars (see year notes)
Specified environmentally friendly plant and machinery where purchased prior to April 2020
Producing up to 50g/km in CO2 emissions
100%
Producing up to 50g/km in CO2 emissions
100%
producing zero CO2 emissions purchased by April 2025
100%
Zero emission goods vehicles and gas refuelling equipment (Note 1)
100%
100%
100%
Research and development
100%
100%
100%
Enterprise zone plant and machinery (companies only)
100%
100%
100%
Energy-saving technologies
100%
100%
100%
Water-efficient technology
100%
100%
100%
Business premises renovation (Note 2)
100%
100%
100%
Structures and buildings allowance
Expenditure on construction of new or renovation of non-residential structures and buildings for contracts entered into on or after 29 October 2018.
2% straightline
3% straightline (from 1 April 2020)
3% straightline
Plant and machinery
Annual investment allowance
From 1 January 2019 to 31 December 2021 -
£1 million
From 1 January 2019 to 31 December 2021 -
£1 million
From 1 January 2019 to 31 December 2021 -
£1 million
Writing down allowances
Plant and machinery:
  • certain thermal insulation
6% - reducing balance
6% - reducing balance
6% - reducing balance
  • solar panels
6% - reducing balance
6% - reducing balance
6% - reducing balance
  • long life assets
6% - reducing balance
6% - reducing balance
6% - reducing balance
  • integral features
6% - reducing balance
6% - reducing balance
6% - reducing balance
Other assets. Plant and machinery (other than integral features)
Cars (see year notes)
For purchases on or after April 2018: Cars with CO2 emissions in excess of 50g/km but not exceeding 110g/km
18% - reducing balance
For purchases on or after April 2018: Cars with CO2 emissions in excess of 50g/km but not exceeding 110g/km
18% - reducing balance
Cars with CO2 emissions in excess of 0g/km but not exceeding 50g/km
18% - reducing balance
Cars (with CO2 emissions greater than 50g/km/110g/km)
with CO2 emissions greater than 110g/km 6% - reducing balance
with CO2 emissions greater than 110g/km 6% - reducing balance
with CO2 emissions greater than 50g/km
6% - reducing balance
Intangible assets
  • companies (all intangibles except goodwill)
4% - straight line (min)
4% - straight line (min)
4% - straight line (min)
  • others (patent rights and know how)
25% - reducing balance
25% - reducing balance
25% - reducing balance
Note 1. Expenditure before 31 March 2018 (corporation tax), 5 April 2018 (income tax).
Note 2. BPRA scheme extended to 31 March 2017 (corporation tax), 5 April 2017 (income tax).
Annual investment allowance
  • The annual investment allowance (AIA) is effectively a 100% capital allowance for plant and equipment except for cars.
  • A tax deduction equal to 100% of qualifying expenditure is allowed up to the AIA limit for the accounting period in which it is incurred. The normal capital allowances (CAs) rules apply to expenditure in excess of the AIA, i.e. an annual 8% (6% since April 2019) of cost writing down allowance for integral features (essentially plant and equipment forming part of a premises) and an annual 18% writing down allowance for other plant and equipment. Claimants are able to choose which assets to include within the AIA.
  • Transitional rule. The maximum AIA is time apportioned where a business’s accounting period spans a change to the limit.
Note 1. A writing down allowance can be claimed in the same year in addition to the AIA for expenditure that exceeds the AIA limit.
Note 2. One amount of allowance will be available each year. But if a business’s accounting period is more or less than a year, the AIA is proportionately increased or reduced.
Super-deduction
  • Budget 2021. To encourage companies to spend, there will be a super-deduction, essentially an enhanced first-year allowance, for most plant and machinery purchased between 1 April 2021 and 31 March 2023. The super-deduction will be 130% of relevant expenditure for assets that would qualify for the main rate of writing down allowances, with a 50% allowance for special rate pool assets, e.g. fixtures.
Plant and equipment - general
  • Capital allowances can be claimed as a deduction for tax. It is based on capital expenditure incurred on qualifying plant and machinery. This is added to the asset “pool”, and writing down allowances at a rate of 18% p.a. (main pool) on a reducing balance basis are given on the residue of expenditure in that pool.
  • There’s a first year allowance at the rate of 100% of capital expenditure for expenditure on plant and equipment of certain specific types, including low CO2 emission below 50g/km (2018/19 onwards) cars, zero emission goods vehicles, gas refuelling equipment, energy-saving and environmentally beneficial products (the enhanced capital allowances (ECA) scheme).
  • Cars with CO2 emissions greater than 110g/km (2018/19 onwards) will have writing down allowances of 8% (6% from April 2019) (special rate pool)
  • Certain long-life plant and machinery, e.g. equipment such as a lift, are only given writing down allowances at 8% p.a. As a rule of thumb, this is likely to apply to assets whose expected working life is at least 25 years.
  • Expenditure on certain listed “integral features” of buildings and structures will give writing down allowances of 8% (6% from April 2019).
  • Writing down allowances of up to £1,000 (small pools allowance) are available for plant and machinery pools (excluding single asset pools) with unrelieved expenditure of £1,000 or less.
  • Plant or machinery (but not cars) with a short life, i.e. less than eight years. An election can be made to have the capital allowances calculated in a separate 18% pool from the main 18% pool.
  • By doing so a balancing allowance (or a charge) may arise on disposal. If at the end of the eight years the asset is still used, the residual expenditure is transferred to the main rate (18%) pool.
  • Buildings, structures and fixtures in buildings cannot generally qualify as plant unless they fall within certain defined categories.
Capital allowances on cars 2016/17 and 2017/18
CO2 emissions
Timing
Rate of CAs
Cars with CO2 up to 75g/km
In tax year of purchase
100%
Cars with CO2 between 76g/km and 130g/km
Writing down allowance on reducing balance
18% per year
Cars with CO2 over 130g/km
Writing down allowance on reducing balance
8% per year
Capital allowances on cars 2018/19
CO2 emissions
Timing
Rate of CAs
Cars with CO2 up to 50g/km
In tax year of purchase
100%
Cars with CO2 between 51g/km and 110g/km
Writing down allowance on reducing balance
18% per year
Cars with CO2 over 110g/km
Writing down allowance on reducing balance
8% per year
Capital allowances on cars 2019/20 nwards
CO2 emissions
Timing
Rate of CAs
Cars with CO2 up to 50g/km
In tax year of purchase
100%
Cars with CO2 between 51g/km and 110g/km
Writing down allowance on reducing balance
18% per year
Cars with CO2 over 110g/km
Writing down allowance on reducing balance
6% per year