UK Capital Allowances Calculator 2026/27
UK Capital Allowances 2026/27 - £1m Annual Investment Allowance, full expensing for companies, 40% FYA from 2026, 14% / 6% writing-down allowances.
Worked scenarios
- £50k new P&M (company, full expensing)£50,000AIA £0 - FYA £50,000 - WDA £0Tax saving £12,500 at 25% (illustrative)
- £50k P&M (sole trader, AIA)£50,000AIA £50,000 - FYA £0 - WDA £0Tax saving £12,500 at 25% (illustrative)
- £40k new zero-emission car (100% FYA)£40,000AIA £0 - FYA £40,000 - WDA £0Tax saving £10,000 at 25% (illustrative)
- £40k car over 50 g/km CO2 (6% WDA)£2,400AIA £0 - FYA £0 - WDA £2,400Tax saving £600 at 25% (illustrative)
2026/27 rules at a glance
- Annual Investment Allowance: 100% relief on up to £1,000,000 a year of plant and machinery, for companies and unincorporated businesses, including special-rate assets (CAA 2001 s.51A).
- Full expensing and 50% FYA: companies only, on new and unused plant and machinery. Where a 50% first-year allowance is claimed, the other half goes into the special-rate pool in the following period, not the year of purchase (CAA 2001 s.58(5)), so for spend within the £1,000,000 limit, claiming the AIA instead gives more year-one relief.
- 40% first-year allowance: from 1 January 2026, on new and unused main-rate plant and machinery, available to unincorporated businesses as well as companies. Cars and second-hand assets are excluded (Finance Act 2026 s.29, new CAA 2001 s.45U).
- Writing-down allowances: main pool 14% for chargeable periods beginning on or after 1 April 2026 (Corporation Tax) or 6 April 2026 (Income Tax), down from 18%, with a blended rate for periods that straddle the date (Finance Act 2026 s.28). Special-rate pool 6%.
- Cars: new and unused zero-emission cars get a 100% first-year allowance until 31 March 2027 (Corporation Tax) or 5 April 2027 (Income Tax). Other cars with CO2 up to 50 g/km go in the main pool and those above 50 g/km in the special-rate pool.
- Tax saving: shown at 25% for illustration. A company pays Corporation Tax at 19% (small profits) to 25% (main rate), with a higher effective marginal rate in the marginal relief band between; a sole trader's saving depends on their Income Tax and Class 4 NI rates.
Sources: GOV.UK rates and pools, full expensing and 50% FYA, Finance Act 2026 s.28, s.29, CAA 2001 s.58, Budget 2025 (zero-emission car FYA extension). Retrieved 1 October 2026.
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Frequently asked questions
What is the Annual Investment Allowance (AIA) for 2026/27?
The AIA is £1,000,000 of qualifying expenditure per accounting period - permanent at this level since 1 April 2023. AIA gives 100% relief in the year of purchase on most plant and machinery, available to companies AND unincorporated businesses (sole traders, partnerships). Spend above £1m on new main-rate plant and machinery can take the 40% first-year allowance (from 1 January 2026); anything not relieved goes into the main or special-rate pool, written down at 14% or 6% a year on a reducing balance (14% for periods beginning on or after 1 April 2026 for companies or 6 April 2026 for the self-employed, 18% before).
What is "full expensing" and who can claim it?
Full expensing gives a 100% First-Year Allowance on new and unused main-pool plant and machinery with no cap - so a company can deduct the full cost from taxable profits in year one. It is COMPANIES ONLY (companies within the charge to Corporation Tax), permanent since Autumn Statement 2023. Sole traders and partnerships cannot claim full expensing but get the £1m AIA and, from 1 January 2026, the 40% first-year allowance on new main-rate plant and machinery. Companies also get a separate 50% First-Year Allowance on new + unused special-rate assets (long-life assets, integral features, thermal insulation); the other 50% enters the special-rate pool in the following period.
How do capital allowances work for cars?
Cars are outside the AIA entirely and follow their own CO2-based rules. New + unused zero-emission cars get a 100% FYA (companies AND sole traders), extended to 31 March 2027 for Corporation Tax and 5 April 2027 for Income Tax. Other cars with CO2 of 50g/km or less go to the main pool at 14% WDA. Cars over 50g/km CO2 - including most petrol/diesel cars - go to the special-rate pool at 6% WDA. Second-hand cars never qualify for FYA regardless of emissions, and cars are excluded from the 40% FYA.
Do sole traders get the same relief as companies?
Sole traders and partnerships get the £1m AIA on most plant and machinery (special-rate assets included), the 100% FYA on new zero-emission cars, the 40% FYA on new main-rate plant and machinery from 1 January 2026, and normal WDA on the pool balance - so for spend under £1m the year-one relief is the same as a company. The companies-only reliefs are 100% full expensing on new main-pool P&M (no cap) and the 50% FYA on new special-rate assets, which only make a difference above the £1m AIA.
How do the main pool and special-rate pool work?
Expenditure not fully relieved in year one (e.g. AIA-exceeded amounts, cars, or second-hand assets) is added to a pool. The main pool covers most plant and machinery and is written down at 14% a year on a reducing balance (18% for periods beginning before 1 April 2026 for companies or 6 April 2026 for the self-employed, blended for periods that straddle the change). The special-rate pool covers long-life assets (25+ year economic life), integral features (heating, lighting, ventilation, lifts), thermal insulation, and high-CO2 cars - written down at 6% reducing balance. Each year the pool balance is reduced by the WDA claimed; a main or special-rate pool balance of £1,000 or less can be written off as a small pools allowance.
When can I claim Capital Allowances?
Expenditure counts for the accounting period in which the obligation to pay becomes unconditional, usually when you sign the contract, or on the due date if payment is due more than 4 months later (CAA 2001 s.5). Hire purchase is the exception: there the expenditure counts when the asset is brought into use (s.67). For a CT600 corporate return, this is the company's accounting period; for a sole trader, it is the basis period that aligns with the personal tax year. Late claims can be made up to 12 months after the filing deadline. The calculator above models year-one relief only - subsequent-year WDA on the residual pool balance is 14% (main pool) or 6% (special-rate pool) reducing balance until the pool is fully written down.