Work out your capital allowances

1. Writing down allowances

When you buy business assets you can usually deduct the full value from your profits before tax using annual investment allowance (AIA).

Use writing down allowances instead if:

  • you’ve already claimed AIA on items worth a total of more than the AIA amount
  • the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

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

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.