What other capital allowances are there?
Businesses can benefit from various other capital allowances, some of which we’ve already touched on.
First, there is the annual investment allowance (AIA), which, like full expensing, allows businesses to write off the full value of an eligible expense in one go. It applies to both main and special rate equipment and is open to sole traders and partnerships on top of companies but is capped at £1m per year.
Therefore, if you’re interested in full expensing but have made purchases below £1m, you’ll actually benefit from the AIA scheme; you’ll benefit more if you’re purchasing special-rate assets or second-hand assets.
Then there is the writing-down allowance. Companies usually use this if their expenditure on qualifying plant and machinery exceeds the annual investment allowance limit to deduct a percentage of an item from their yearly profits. They are also used where the annual allowance does not apply, such as with cars and gifts.
As of 2023/24, 18% of the net value of main rate items can be claimed with writing-down allowances; it’s 6% for special rate expenditure.
Lastly is the first-year allowance, which should not be confused with the 50% first-year allowance. Similar to the AIA, you can use the first-year allowance to claim the full cost of eligible assets in the same accounting period.
Specific types of expenditure include:
- electric cars and cars with zero CO2 emissions
- plant and machinery for gas refuelling stations, such as storage tanks, pumps
- gas, biogas and hydrogen refuelling equipment.
Expenditure claimed with the first-year allowance does not count towards your annual investment allowance, so businesses should make sure to make full use of each scheme available to them.
Need help making sense of your expenditure to ensure you claim all that you’re entitled to? Get in touch with us for assistance with capital allowances.
Talk to us about full expensing.
