UK Annual Investment Allowance Calculator 2026/27

UK Annual Investment Allowance calculator 2026/27 - 100% relief on plant and machinery up to £1m a year, company full expensing, and the pool above the cap.

Business & Company (LTD)

Worked scenarios

Year-one deduction from taxable profits for 2026/27.

£50k P&M, sole trader (full AIA)

£50,000

AIA £50,000 - FYA £0 - WDA £0
£500k P&M, sole trader (AIA, within cap)

£500,000

AIA £500,000 - FYA £0 - WDA £0
£1.5m new P&M, sole trader (AIA + 40% FYA)

£1,200,000

AIA £1,000,000 - FYA £200,000 - WDA £0
£1.5m new P&M, company (full expensing)

£1,500,000

AIA £0 - FYA £1,500,000 - WDA £0
£200k P&M, partnership (AIA)

£200,000

AIA £200,000 - FYA £0 - WDA £0
£1.5m special-rate, partnership (AIA + 6% WDA)

£1,030,000

AIA £1,000,000 - FYA £0 - WDA £30,000

How the Annual Investment Allowance works

The AIA lets a business deduct the full cost of qualifying plant and machinery from its taxable profits for the period in which the expenditure is incurred, up to £1,000,000 a year (Capital Allowances Act 2001 s.51A), instead of writing it down over many years. The cash value of the deduction is the tax it saves at your marginal rate: up to 47p per £1 for an additional-rate sole trader (45% Income Tax + 2% Class 4 NI), or 26.5% for a company in the marginal relief band. Partnerships can claim it only if every member is an individual.

The cap has moved a great deal since the AIA was introduced, which is why older guidance is so often wrong about it (GOV.UK history table):

April 2008 - AIA introduced at £50,000.
April 2010 - raised to £100,000.
April 2012 - cut to £25,000.
1 January 2013 to 31 March / 5 April 2014 - temporary increase to £250,000.
1 / 6 April 2014 to 31 December 2015 - £500,000.
1 January 2016 - set at £200,000.
1 January 2019 - temporary increase to £1,000,000, later extended.
1 April 2023 - £1,000,000 kept with no end date for expenditure from this date (Finance (No. 2) Act 2023 s.8).

What qualifies for AIA

Machinery - CNC machines, lathes, presses, manufacturing kit.
Equipment - test rigs, lab apparatus, retail point-of-sale, restaurant fit-out.
Vans, lorries, and HGVs - commercial vehicles qualify (cars are excluded; see below).
IT hardware - servers, laptops, monitors, networking, printers.
Office furniture - desks, chairs, partitions, meeting-room kit.
Integral features - heating, lighting, electrical, air-conditioning, ventilation, lifts, escalators, water systems (special rate pool items, 6% WDA, but AIA-eligible).
Long-life assets - items with a 25-year+ expected economic life (special rate).
Thermal insulation added to an existing building (special rate).

What does not qualify for AIA

Cars - excluded from AIA (CAA 2001 s.38B, general exclusion 2). New and unused zero-emission cars get a 100% first-year allowance for expenditure up to 31 March 2027 (companies) or 5 April 2027 (Income Tax) under s.45D. Other cars bought from April 2021: up to 50 g/km CO2 go to the main pool (14% from April 2026), over 50 g/km to the special rate pool (6%).
Land and buildings - the structure is covered by the Structures and Buildings Allowance, not AIA. Integral features inside a building can qualify for AIA separately.
Assets given to the business - excluded (s.38B, general exclusion 5, via s.14); claim writing down allowances on market value instead.
Items you owned before bringing them into the business - excluded (general exclusion 5, via s.13); writing down allowances on market value instead.
Expenditure in the period the business stops - excluded (general exclusion 1).
Items intended for resale - that is trading stock, not capital expenditure.

AIA vs full expensing for companies

A company within Corporation Tax has two 100% routes for plant and machinery (HMRC):

AIA - 100% relief up to £1,000,000, on new or second-hand main-pool and special-rate items.
Full expensing - 100% relief with no cap on new and unused main-rate plant and machinery (not cars, not second-hand), made permanent by Finance Act 2024 s.1. New special-rate items get a 50% first-year allowance instead.

Companies typically claim full expensing on eligible new main-rate plant and keep the AIA for what full expensing does not cover: second-hand assets and special-rate items such as integral features, long-life assets and thermal insulation. Full expensing has a cost on sale: disposal of an asset that got it brings a balancing charge (CAA 2001 ss.59A-59B).

Sole traders and partnerships: AIA and the new 40% allowance

Full expensing is for companies only. Since 1 January 2026 there is a 40% first-year allowance for new and unused main-rate plant and machinery (not cars), available to every business including sole traders and partnerships (CAA 2001 s.45U, inserted by Finance Act 2026 s.29). It matters once spending is above the £1,000,000 AIA, or for assets bought for leasing. The remaining 60% goes into the main pool from the next period.

Spending above the £1,000,000 cap

Expenditure above the AIA that gets no first-year allowance goes into a pool and is written down on a reducing balance:

Main pool - 14% a year, down from 18%, for chargeable periods beginning on or after 1 April 2026 (Corporation Tax) or 6 April 2026 (Income Tax) (CAA 2001 s.56(1), amended by Finance Act 2026 s.28). A period that straddles the date uses a hybrid rate weighted by days either side.
Special rate pool - 6% a year, unchanged. Long-life assets, integral features, thermal insulation, cars over 50 g/km.

Example: a sole trader whose accounting period begins on or after 6 April 2026 spends £1,500,000 on main-rate machinery.

New and unused: £1,000,000 AIA plus the 40% first-year allowance on the other £500,000 (£200,000) gives £1,200,000 in year 1. The remaining £300,000 joins the main pool and earns £42,000 (14%) in year 2.
Second-hand: £1,000,000 AIA plus 14% writing down allowance on £500,000 (£70,000) gives £1,070,000 in year 1, leaving £430,000 in the pool for £60,200 in year 2.

Connected businesses and accounting periods that are not 12 months

Companies in a group, or controlled by the same person and related to each other (sharing premises or carrying on similar activities), share a single £1,000,000 AIA and choose how to split it (CAA 2001 ss.51C-51G). A sole trader or partnership with more than one business usually gets an AIA for each, but only one if the businesses are controlled by the same person and either share premises or carry on similar activities (GOV.UK; HMRC manual CA23087 to CA23090).
Accounting periods that are not 12 months get a proportionate AIA, increased or reduced (CAA 2001 s.51A(6)): a 9-month period gets £750,000, a 6-month period £500,000, and a longer period a proportionately larger amount. Different rules apply to periods over 18 months.

When to claim

AIA is claimed for the chargeable period in which the expenditure is incurred. Section 5 of CAA 2001 sets the general rule: expenditure is incurred as soon as there is an unconditional obligation to pay it, even if payment is due later. If payment is not due until more than 4 months after that, it is incurred on the date payment is due.

Company - on the Company Tax Return, with a separate capital allowances calculation.
Sole trader / partnership - on the Self Assessment return (self-employment pages) or the partnership return.

Hire purchase has its own rule in section 67 CAA 2001. Self Assessment returns can be amended within 12 months of the 31 January filing deadline.

Marginal-rate tax saving (sole trader vs company)

Each £1,000 of allowance saves a different amount of tax depending on the entity and the band the profit is in, as long as the deduction keeps the profit inside that band (2026/27, rest of UK, standard Personal Allowance; higher rate from £50,270 and additional rate above £125,140 of total income). A larger claim that pulls profit into a lower band saves less per pound; the calculator above works that out:

Sole trader, basic rate (20% IT + 6% Class 4 NI) - saves £260.
Sole trader, higher rate (40% IT + 2% Class 4 NI) - saves £420.
Sole trader, additional rate (45% IT + 2% Class 4 NI) - saves £470.
Company at the small profits rate (profits up to £50,000) - saves £190.
Company in marginal relief (profits £50,000 to £250,000) - saves £265.
Company at the main rate (profits over £250,000) - saves £250.

A higher-rate sole trader saves more per £1 of AIA than a company, because the sole trader's marginal rate (42% to 47%, more inside the Personal Allowance taper) is above the company's (19% to 26.5%). That is not the whole comparison: profits a company pays out to its owners are taxed again as dividends.

Related tools

/capital-allowances-calculator - the full capital-allowances stack (AIA + FYA + WDA across every asset type, including cars).
/corporation-tax-calculator - cross-check the precise CT saving against your taxable profit (Small Profits Rate, Marginal Relief, or Main Rate).
/self-employed-calculator - cross-check the sole-trader marginal rate (Income Tax and Class 4 NI).

Other UK tax calculators that pair with the AIA.

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Frequently asked questions

What is the Annual Investment Allowance (AIA) for 2026/27?

The AIA lets a business deduct the full cost of qualifying plant and machinery from taxable profits for the period the expenditure is incurred, up to £1,000,000 a year (Capital Allowances Act 2001 s.51A). Finance (No. 2) Act 2023 s.8 kept the £1m level for expenditure from 1 April 2023 with no end date. Companies, sole traders and partnerships (where every partner is an individual) can claim it, although companies usually use full expensing on new main-rate plant instead.

What expenditure qualifies for AIA?

Most plant and machinery used in the trade qualifies - machinery, equipment, vans, lorries, IT hardware, office furniture, and integral features (heating, lighting, ventilation, lifts). The asset can be new or second-hand. Excluded items: cars (which follow separate CO2-based rules), land and buildings (Structures and Buildings Allowance at 3% straight-line covers buildings), assets given to the business, and items transferred from personal use into the business.

Can companies claim both AIA and full expensing?

Companies have a choice on new and unused main-pool plant and machinery: claim full expensing (100% First-Year Allowance, no cap) or claim AIA. Full expensing has no £1m cap, but it is not clawback-free: on disposal the balancing charge is the whole disposal value where full expensing covered the full cost (half of it for the 50% first-year allowance), immediately and with no holding-period or economic-life condition. AIA assets instead reduce the pool, so a disposal usually just cuts the pool rather than creating a charge. AIA still matters for companies buying second-hand assets (where FE does not apply) and for special-rate items where the 50% FYA + AIA combination can be more favourable. Full expensing is for companies only; disposals of fully expensed assets bring a balancing charge under CAA 2001 ss.59A-59B. Sole traders and partnerships have the AIA and, since 1 January 2026, a 40% first-year allowance on new main-rate plant (CAA 2001 s.45U).

What happens if I spend more than £1,000,000?

New and unused main-rate plant above the cap can get the 40% first-year allowance (CAA 2001 s.45U, from 1 January 2026); otherwise the excess goes into the main pool (14% writing down allowance for periods beginning on or after 1 April 2026 for companies or 6 April 2026 for Income Tax, 18% before) or the special-rate pool (6%). A sole trader buying £1.5m of new machinery claims £1m of AIA plus 40% of the £500,000 excess, £200,000, so £1.2m in year one; the £300,000 left goes into the main pool at 14% a year from the next period. Companies meet the cap mainly on second-hand or special-rate spend, because new main-rate plant gets uncapped full expensing.

How do AIA rules apply to cars?

Cars are excluded from AIA entirely. They follow CO2-based first-year and pool rules. New + unused zero-emission cars (0 g/km) get a 100% First-Year Allowance, available to both companies and sole traders. This 100% allowance runs to 31 March 2027 for companies and 5 April 2027 for Income Tax (CAA 2001 s.45D). Other cars bought from April 2021 with emissions up to 50 g/km go to the main pool (14% from April 2026); above 50 g/km to the special-rate pool (6%). Second-hand cars and cars generally do not get full expensing or the 40% first-year allowance. If you need to model car-only capex, use the /capital-allowances-calculator which handles every asset class.

When is the AIA claim made and how does it interact with the accounting period?

AIA is claimed for the chargeable period in which the expenditure is incurred - under section 5 CAA 2001 that is as soon as there is an unconditional obligation to pay, not when the asset is brought into use - on the CT600 (company) or self-assessment return (sole trader / partnership). The £1m cap is adjusted in proportion for periods that are not 12 months, up or down (s.51A(6)): a 6-month period gets £500,000 of AIA. Companies controlled by the same person share a single £1m allowance and decide how to allocate it. Late claims can be amended within the normal time limits (12 months after the filing deadline for a company; 12 months after 31 January for a sole trader).