Introduction to capital allowances

Capital Allowances

Capital allowance schemes are one of the most complex areas of UK tax. We get that and as a founder, you don’t want to be trawling around online trying to understand what they are and how they work when you also have a business to grow!

We’ve broken it down into the important parts to save you time.

What are Capital Allowance schemes?

Put simply, capital allowances are tax relief schemes for businesses. They allow you to deduct some or all of the value of an item from your profits before paying tax, thereby reducing your taxable profits and overall tax charge.

HMRC states you can claim capital allowances on:

• Fixtures and fittings
• Plant and machinery
• Business-related vehicles (not cars)
• Integral features
• Agricultural and horticultural equipment

See our more detailed lists of qualifying assets under each capital allowance type within each sub-section.

It's worth noting that if you are a sole trader or partnership and have an income of £150,000 or less a year, you might be able to use a simpler system called cash basis.