Capital allowances ― overview

Produced by Tolley
  • (Updated for Budget 2021)

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Capital allowances ― overview
  • Definition of capital allowances
  • Summary of rates ― capital allowances
  • Links to articles ― capital allowances

Capital allowances ― overview

Definition of capital allowances

In the broadest sense, capital allowances are a form of tax-approved depreciation. Depreciation, as calculated under GAAP, is not an allowable deduction in computing the chargeable profits of a trade because it is an item of a capital nature. See the Capital vs revenue expenditure guidance note. Instead, relief is given by treating the capital allowances as an expense to be deducted when arriving at the taxable trading profits. Likewise, any charges are treated as taxable receipts.

In addition to traders (self-employed individuals, partnerships or trading companies), capital allowances can also be claimed by for expenditure incurred by property businesses and certain other qualifying activities. See the Capital allowances ― general requirements guidance note.

The Capital allowances ― definition video provides a summary overview of capital allowance definitions including what qualifies as plant and machinery, the treatment of buildings and integral features.

Summary of rates ― capital allowances

The following table summarises the main capital allowances available, the rate of the allowance and if relevant any important dates or points to note, for further details including any relevant qualifying conditions or restrictions see the relevant guidance note as linked in the table.

DescriptionRelevant assetsRateGuidance notesNotes
Super-deductionExpenditure on new plant or machinery by companies which would normally qualify for 18% writing down allowance but exclu

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