Capital allowances: calculation
Treat capital allowances like expenses
Capital allowances are deducted in computing the taxable profits of the rental business, as if they were an expense of the business. They may increase a loss, or turn what would have been a profit into a loss.
Treat balancing charges like receipts
Balancing charges are added in computing the taxable profits of the rental business.
Prisha has rents from several let properties amounting to £24,000 in the year ended 5 April 2016, and allowable expenses of £12,500. Her capital allowances on equipment used in the maintenance of the properties come to £2,800 and there is a £600 balancing charge (adjusted for private use) on the sale of her old van (which was partly used privately). Her profit for 2015-16 is £9,300 as follows:
|Plus balancing charge||£600|
|Minus capital allowances||£2,800||£2,200|