2 min read
Definition
Capital allowances let a company deduct the cost of qualifying capital assets from its taxable profit, reducing corporation tax. Reliefs such as the annual investment allowance and full expensing can allow much or all of the cost to be claimed in the year of purchase.
In plain terms
Buy qualifying equipment and the taxman effectively shares the cost by cutting your tax bill — sometimes fully in the year you buy.
Why it matters for your company
Capital allowances can make financing an asset even more attractive, since you fund it over time while claiming the relief. See asset finance.
Related reading
Asset finance for UK businesses
Asset finance lets you acquire equipment, vehicles or machinery without paying the full cost up front. This…
Read →Corporation tax explained for company directors
Corporation tax is the charge on your company's profits — and like VAT, it lands as a lump sum on a fixed…
Read →
Capital Expenditure (CapEx): What It Means and How It Flows Through Your Accounts
Capital expenditure is money spent on acquiring or improving long-term assets — plant, property, vehicles, or…
Read →Depreciation: Methods, Accounting Treatment, and the Difference from Capital Allowances
Depreciation is the systematic allocation of a fixed asset's cost over its expected useful economic life,…
Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.