How to claim capital allowances on equipment

Step 1: Identify qualifying spend

List the capital items you bought in the period — machinery, tools, computers, commercial vehicles, fixtures. These are plant and machinery that qualify for capital allowances. Cars have their own emissions-based rules; buildings mostly do not qualify (though the Structures and Buildings Allowance exists separately).

Step 2: Apply the Annual Investment Allowance

Claim the Annual Investment Allowance first — up to £1 million of qualifying spend deducted 100% in the year of purchase. For most SMEs this covers all their equipment spend, giving immediate full relief against taxable profit.

Step 3: Pool anything above the allowance

Spend beyond the AIA (or not qualifying for full expensing) goes into the main pool, written down at 18% a year, or the special-rate pool at 6% on a reducing-balance basis. Track the pool balances year to year so you claim the writing-down allowance each period.

Step 4: Enter the claim in your return

Capital allowances are claimed in the CT600 corporation tax computation — they are not automatic. Your accounting software or accountant translates the spend into the right allowance and reduces the tax. Keep purchase invoices as evidence.

Step 5: Time and fund purchases well

Because allowances fall in the year of purchase, timing spend across a year end shifts the relief between years. Asset finance spreads the cash cost while the allowance cuts the tax.

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