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Definition
Capital allowances give tax relief on qualifying capital spend — plant, machinery, vehicles — that cannot be deducted as everyday expense. Reliefs include the Annual Investment Allowance and full expensing, which can allow a full deduction in the year of purchase.
In plain terms
They are how HMRC lets you write off big asset purchases against tax. Accounting depreciation and tax capital allowances are separate systems that rarely match.
Why it matters for your company
Timing an asset purchase to use allowances can materially cut your corporation tax. Estimate the tax effect with the corporation tax calculator and take advice before large capex.
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