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 drops into the main or special-rate pool and is written down at 18% or 6% per year on a reducing-balance basis.

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 (limited companies subject to Corporation Tax), permanent since Autumn Statement 2023. Sole traders and partnerships cannot claim full expensing but still get the £1m AIA. Companies also get a separate 50% First-Year Allowance on new + unused special-rate assets (long-life assets, integral features, thermal insulation).

How do capital allowances work for cars?

Cars are outside the AIA entirely and follow their own CO2-based rules. New + unused zero-emission electric cars get a 100% FYA (companies AND sole traders). New + unused cars 1-50g/km CO2 go to the main pool at 18% 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 are written down at the relevant pool rate.

Do sole traders get the same relief as companies?

Sole traders and partnerships get the £1m AIA on most plant and machinery, plus the 100% FYA on new zero-emission cars, plus normal WDA on the pool balance - so for spend under £1m on standard equipment the relief is identical to 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 - these only matter for companies spending above £1m or buying integral features / long-life assets.

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 18% per year on a reducing balance. 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; balances under £1,000 can be written off as a "small pool" claim.

When can I claim Capital Allowances?

Allowances are claimed for the accounting period in which the asset is brought into use in the business (or contractually committed to under hire-purchase). 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 straightforward 18% or 6% reducing balance until the pool is fully written down.

£25,000 Capital Expenditure UK 2026/27: Full Expensing, AIA, WDA Breakdown

A UK limited company spending £25,000 on new plant and machinery in 2026/27 claims £25,000 of year-one relief (100% full expensing), worth roughly £6,250 in Corporation Tax at 25%. A sole trader claims £25,000 via the £1,000,000 Annual Investment Allowance plus 18% Writing Down Allowance on any excess. Verified against gov.uk capital allowances.

Company, new P&M (full expensing)

£25,000

CT saving £6,250 at 25%

Sole trader, P&M (AIA + WDA)

£25,000

AIA £25,000 + WDA £0

Residual pool (sole trader)

£0

Carried into year-2 main pool at 18% WDA

Decision tree for £25,000 of capex

Is it a limited company buying new and unused main-pool plant and machinery? Claim 100% full expensing on the entire £25,000. Year-one relief = £25,000, residual pool = £0.
Otherwise, claim Annual Investment Allowance on up to £1,000,000 of the cost (100% in year one). Available to both companies and sole traders on most plant and machinery.
For new + unused special-rate assets (integral features, long-life, thermal insulation) a company can claim a 50% First-Year Allowance on top of any AIA-eligible amount, with the residual 50% written down at 6% per year.
Cars sit outside AIA: new zero-emission cars get 100% FYA, low-emission (1-50g/km) goes to the main pool at 18% WDA, high-emission (>50g/km) to the special-rate pool at 6% WDA.
Anything that does not qualify for AIA / FYA goes into the relevant pool and is written down at 18% (main) or 6% (special-rate) reducing balance each year.

All 10 scenarios at £25,000

Year-one relief and indicative CT saving (at the 25% main rate) for each asset type and entity type, assuming the asset is new and unused. Switch to a residual cost / second-hand purchase via the main calculator.

Asset type	Entity	AIA	FYA	WDA yr1	Year-1 relief	CT saving 25%
Plant & machinery	Limited company	£0	£25,000	£0	£25,000	£6,250
Plant & machinery	Sole trader	£25,000	£0	£0	£25,000	£6,250
Special-rate (integral features, long-life)	Limited company	£0	£12,500	£750	£13,250	£3,313
Special-rate (integral features, long-life)	Sole trader	£25,000	£0	£0	£25,000	£6,250
Zero-emission car	Limited company	£0	£25,000	£0	£25,000	£6,250
Zero-emission car	Sole trader	£0	£25,000	£0	£25,000	£6,250
Car 1-50 g/km CO2	Limited company	£0	£0	£4,500	£4,500	£1,125
Car 1-50 g/km CO2	Sole trader	£0	£0	£4,500	£4,500	£1,125
Car >50 g/km CO2	Limited company	£0	£0	£1,500	£1,500	£375
Car >50 g/km CO2	Sole trader	£0	£0	£1,500	£1,500	£375

Worked example: company buying £25,000 of new plant and machinery

A UK limited company purchases £25,000 of new and unused main-pool plant and machinery in its 2026/27 accounting period (e.g. CNC machine, commercial fit-out equipment, IT hardware). Under 100% full expensing (permanent since Autumn Statement 2023), the entire cost is deducted from taxable profits in year one.

Year-1 relief: £25,000 (100% of cost)
AIA used: £0 - FYA used: £25,000 - WDA used: £0
Residual pool carried forward: £0
Indicative Corporation Tax saving at the 25% main rate: £6,250. Cross-check with /corporation-tax-calculator if your profits sit in the £50,001 - £250,000 Marginal Relief band (effective marginal rate 26.5%) or below £50,000 (Small Profits Rate 19%).

Cite or embed - free under CC BY 4.0

Related calculators

Capital Allowances calculator - interactive version: change cost, asset type, and second-hand status.
Corporation Tax calculator - pair the year-1 relief with your actual taxable profit to get the precise CT saving (Small Profits Rate, Marginal Relief, or Main Rate).

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 drops into the main or special-rate pool and is written down at 18% or 6% per year on a reducing-balance basis.
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 (limited companies subject to Corporation Tax), permanent since Autumn Statement 2023. Sole traders and partnerships cannot claim full expensing but still get the £1m AIA. Companies also get a separate 50% First-Year Allowance on new + unused special-rate assets (long-life assets, integral features, thermal insulation).
How do capital allowances work for cars?: Cars are outside the AIA entirely and follow their own CO2-based rules. New + unused zero-emission electric cars get a 100% FYA (companies AND sole traders). New + unused cars 1-50g/km CO2 go to the main pool at 18% 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 are written down at the relevant pool rate.
Do sole traders get the same relief as companies?: Sole traders and partnerships get the £1m AIA on most plant and machinery, plus the 100% FYA on new zero-emission cars, plus normal WDA on the pool balance - so for spend under £1m on standard equipment the relief is identical to 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 - these only matter for companies spending above £1m or buying integral features / long-life assets.
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 18% per year on a reducing balance. 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; balances under £1,000 can be written off as a "small pool" claim.
When can I claim Capital Allowances?: Allowances are claimed for the accounting period in which the asset is brought into use in the business (or contractually committed to under hire-purchase). 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 straightforward 18% or 6% reducing balance until the pool is fully written down.