Glossary

Balancing charge

A balancing charge claws back excess capital allowances when you sell an asset for more than its written-down value — adding to taxable profit.

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On disposalClaws back allowances

Adds totaxable profit

Definition

A balancing charge arises when you sell an asset for more than its tax written-down value after claiming capital allowances. It effectively claws back excess relief, adding to your taxable profit.

In plain terms

If you claimed allowances as if an asset lost value, then sold it for more than its written-down value, the taxman recovers some relief through a balancing charge. The reverse — a balancing allowance — gives extra relief if you sold for less.

Why it matters for your company

Balancing charges catch directors out when disposing of equipment or vehicles on which generous allowances were claimed. Factoring them in when you sell assets avoids an unexpected addition to the tax bill — track values in your fixed asset register.