Capital allowances are a type of tax relief for businesses. They let you deduct some or all of the value of an item from your profits before you pay tax.

You can claim capital allowances on:

  • equipment
  • machinery
  • business vehicles, for example vans, lorries or business cars

These are known as ‘plant and machinery’.

This guide is also available in Welsh (Cymraeg).

If you’re a sole trader or partnership and have an income of £150,000 or less a year, you may be able to use a simpler system called cash basis instead.

Types of capital allowances for plant and machinery

You can claim different amounts, depending on which capital allowance you use.

The capital allowances (also known as plant and machinery allowances) are:

If an item qualifies for more than one capital allowance, you can choose which one to use.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

  • you owned it before you started using it in your business
  • it was a gift

Other business costs

You claim for the cost of things that are not business assets in a different way. This includes:

  • your business’s day-to-day running costs
  • items that it’s your trade to buy and sell
  • interest payments or finance costs for buying assets

Claim these costs as business expenses if you’re a sole trader or partnership, or deduct from your profits as a business cost if you’re a limited company.

Other capital allowances

As well as plant and machinery, you can also claim capital allowances for:

If you let out residential property

You can only claim for items to be used in residential property if your business qualifies as a furnished holiday lettings business. In each year the property must be:

  • available for holiday letting for 210 days
  • let for 105 days or more