Capital Allowances for Limited Companies 2026/27

Companies cannot deduct equipment costs in the accounts; relief comes through capital allowances, and HMRC does not give them automatically. Claim them in the company tax return (CT600). The deadline is 12 months after the filing date for that return. Plant and machinery covers most business assets: vans, computers, tools, machinery, office furniture and cars.

The AIA gives a 100% deduction for up to £1 million a year of plant and machinery, new or second-hand. Cars do not qualify. Because full expensing covers unlimited spending on new main-rate assets, save your AIA for second-hand equipment and special-rate items that full expensing does not reach.

Full expensing, now permanent, gives companies a 100% deduction with no upper limit on new and unused main-rate plant and machinery: computers, office furniture, vans, lorries and machinery. Cars and second-hand assets are excluded. Example: a company paying 25% corporation tax buys £120,000 of new vans and saves £30,000 of tax in the same year. If you later sell the assets, the proceeds are taxed as a balancing charge.

New special-rate assets, such as integral features (lighting, heating, electrics), thermal insulation and long-life assets, qualify for a 50% first-year allowance with no upper limit. The remaining 50% goes into the special rate pool at 6% a year. Use the AIA first if you have any left, as it gives 100%.

Spending on or after 1 January 2026 on new main-rate assets qualifies for a 40% first-year allowance, including assets bought to lease out. For most companies full expensing is better, so the 40% FYA matters mainly for leasing businesses where full expensing and the AIA are not available. Cars are excluded.

From 1 April 2026, main-rate writing down allowances fell from 18% to 14% a year; special-rate stays at 6%. A period that spans the date uses a blended rate. A smaller WDA can still be the better claim: if a 100% deduction would create a loss you cannot use soon, if profits are taxed at 19% now but 25% later, or if you plan to sell the asset soon and want to avoid a large balancing charge. You can mix and match claims, and claim less than the maximum.

Buying a few days before your year end brings relief forward by 12 months. A company with a 31 March 2027 year end that buys £20,000 of new IT kit on 28 March gets full expensing in 2026/27; buy it on 2 April and the relief waits a year. If your AIA for the year is used up and the asset is second-hand, delaying until the new year may unlock a fresh AIA instead.

New, unused zero-emission cars qualify for a 100% first-year allowance on spending up to 31 March 2027 for companies. Example: a £45,000 electric car saves £11,250 of corporation tax at 25% in year one. The director's benefit-in-kind rate on an electric car is only 4% for 2026/27. Second-hand electric cars do not qualify for the 100% FYA.

Cars with CO2 emissions of 50g/km or less go into the main pool at 14% a year; above 50g/km they go into the special rate pool at 6%. On a £35,000 car, that is £4,900 of allowances in year one instead of £2,100.

Spending on electric vehicle charge points qualifies for a 100% first-year allowance if incurred by 31 March 2027 for companies. Workplace chargers give immediate relief and support staff who choose electric cars.

For kit you expect to replace within eight years, such as computers, a short-life asset election puts each item in its own pool. When you sell or scrap it, you get a balancing allowance for any unrelieved cost instead of it lingering in the main pool. If the asset is still held after eight years, its balance moves to the main pool.

When the balance on your main or special rate pool falls to £1,000 or less, you can claim it all in one go with the small pools allowance. A pool of £800 is written off in full, instead of a WDA of £112 this year and years of small claims after.