Capital allowances

Also called Annual Investment Allowance, AIA, Full expensing

Tax relief on equipment and other capital purchases, replacing depreciation for tax purposes.

What it means

HMRC ignores the depreciation in your accounts and gives relief through capital allowances instead. The Annual Investment Allowance lets most businesses deduct the full cost of qualifying plant and machinery in the year of purchase, up to an annual limit. Companies may also access full expensing for qualifying new assets.

Cars have their own rules, based on emissions.

Why it matters

It changes the after-tax cost of buying equipment, sometimes substantially, and it can change the best month to buy.

It is also one of the most commonly under-claimed reliefs, particularly on fixtures within a commercial property.

What it looks like in practice

Buying before your year end rather than after moves the relief a full year earlier. Buying on hire purchase can still qualify at the outset even though you pay over time.

If you own or have refurbished commercial premises, ask specifically about capital allowances on the fixtures — this often needs a specialist survey and is frequently worth it.

What to watch out for

Assuming everything qualifies. Buildings, land and most cars do not, or not in the same way.

Claiming full relief on an asset with private use — the allowance is restricted proportionally.

Where to get proper advice

Your accountant handles the annual claim. For property fixtures, a capital allowances specialist.