Capital Allowances Calculator, 2026/27

How this is calculated

Qualifying spend is first set against the Annual Investment Allowance, which gives a 100% deduction up to £1,000,000 in the period. Any spend above that limit is added to the main pool alongside the balance already carried forward from previous years.

The combined main pool balance then attracts a writing down allowance of 18.0% a year, calculated on a reducing balance basis, meaning the same percentage is applied to a shrinking balance each year rather than the original cost.

The total of the AIA claimed and the writing down allowance is deducted from taxable profit for the period, and the corporation tax saving is estimated by comparing the tax due on profit before and after those allowances.

Special rate pool and other assets

Certain assets, including long-life assets, thermal insulation, and integral features of buildings such as lifts, air conditioning and electrical systems, go into a separate special rate pool, written down at a slower 6% a year unless covered by the AIA first.

Cars are dealt with outside these pools entirely, with the rate depending on CO2 emissions, and cars with any significant private use by a sole trader or partner are adjusted for that private element, though this does not apply to the same extent for companies.

Practical planning points

Because writing down allowances continue indefinitely on a reducing balance, small pool balances persist for years generating modest annual relief; some businesses choose to write off very small balances in full where the pool falls below £1,000, which is permitted under a small pools allowance.

Timing large purchases carefully around your year end can bring relief forward by a full accounting period, which matters most where a company is close to a corporation tax threshold and marginal relief is in point.

What is the difference between the AIA and writing down allowances?

The AIA gives 100% relief in the year of purchase up to the annual limit. Writing down allowances give partial relief spread over many years at a fixed percentage of the remaining pool balance, used once the AIA limit is exhausted.

Can I choose not to claim capital allowances?

Yes, claiming allowances is optional, and companies sometimes disclaim some or all of the AIA in a loss-making year to preserve the pool for a future year when relief is worth more, though this needs careful planning.

What happens to the pool balance if I sell an asset?

Sale proceeds, up to the original cost, are deducted from the pool balance, which can create a balancing charge if the pool goes negative, effectively clawing back allowances previously given.

Do capital allowances apply to a home office or extension?

Structural building costs generally do not qualify, but integral features and certain fixtures such as air conditioning or wiring installed as part of the work can qualify for the special rate pool or the AIA.