The UK government's capital allowances regime provides significant tax relief on qualifying plant and machinery expenditure. Understanding these reliefs can materially reduce your tax bill when buying new equipment — or when disposing of existing assets.
Full expensing allows companies to deduct 100% of the cost of qualifying new plant and machinery in the year of purchase. This is available to limited companies on main pool assets purchased new. It effectively eliminates the cash-flow disadvantage of capital investment.
The AIA currently stands at £1 million per year and applies to both new and used plant and machinery. It's available to sole traders, partnerships, and limited companies, and applies in the year of purchase.
Assets that don't qualify for full expensing or AIA enter the writing down allowance pool — typically 18% per year for main pool assets and 6% for special rate assets.
When you sell plant machinery, you may trigger a balancing charge (if you've claimed more than the asset is worth) or a balancing allowance (if you've claimed less). Understanding your tax position before selling helps you time disposals optimally.
This guide is for general information only. Always consult a qualified accountant or tax adviser for advice specific to your business.
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