Guidance

Capital allowances: accounting periods which are more or less than a year

Guidance for claiming annual investment allowance, small pools allowance and writing down allowance for accounting periods that are more or less than a year.

Accounting periods less than a year

For accounting periods less than a calendar year, the amount of annual investment allowance (AIA), small pools allowance and writing down allowance you claim is reduced.

For example, if your accounting period is 6 months, the maximum AIA you can claim is £250,000 (6/12 × £500,000).

If your accounting period is 187 days and the balance in your main pool is £2,000, the writing down allowance is restricted as follows:

Writing down allowance (£2,000 x 18%) = £360

Restricted for 187 day period (186/365 x £360) = £184.44

The writing down allowance you can claim is £185.

This does not apply to first year allowances. You can claim the full amount of the first year allowance if you are still in business at the end of the accounting period.

Accounting periods 12 to 18 months

For accounting periods longer than a calendar year but less than 18 months, the maximum AIA, small pools allowance and writing down allowance you can claim is increased.

For example, if your accounting period is 17 months your small pools allowance is £1,417 (17/12 × £1,000).

This does not apply to first year allowances. You can only claim the full allowance, it is not proportionately increased.

Accounting periods longer than 18 months

For accounting periods longer than 18 months, you need to split into 2 periods. These are:

  • a 12 month period
  • any remaining balance (up to 12 months)

You work out the allowances for each period.

If the second period is less than 12 months, you follow the guidance for accounting periods less than a year.

Gaps and overlapping accounting periods

If there is a gap between accounting periods, the gap period needs to be added to the end of the year in the first accounting period.

If 2 accounting periods overlap each other, add the overlap part to the first accounting period.

Published 25 February 2016