What are Capital Allowances?

Capital allowances are tax deductions that UK businesses can claim on qualifying capital expenditure, such as equipment, machinery, and commercial vehicles, to reduce their taxable profits. Understanding what are capital allowances is crucial for maximising your business's tax efficiency, as they allow you to spread the cost of assets over several years or claim immediate relief through schemes like the Annual Investment Allowance.

Last updated
Published
1 min read

Written by MAAT

What are Capital Allowances?

Capital allowance is an expenditure you can claim on assets you purchase for use in your business.

In addition to the purchase of business assets, you can also claim capital allowances for renovating business premises in disadvantaged areas in the UK, extracting minerals, research and development, patents and more. Further information can be found on the HMRC website.



Sole Trader vs Limited Company - Find Your Best Fit
CalculatorsSole Trader vs Limited Company Calculator and Assessment

Our sole trader vs limited company calculator helps you determine the most tax-efficient business structure by comparing your potential take-home income, National Insurance contributions, and Corporation Tax liabilities. Simply input your expected annual profit to receive an instant comparison showing which option could save you money with HMRC.

Calculate now
Capital allowances consultation
Online Accountants
Speak to a tax accountant

Free 20 minute discussion about capital allowances.

Schedule a call
Capital allowances consultation
Online Accountants
Speak to a tax accountant

Free 20 minute discussion about capital allowances.

Schedule a call

Read more of our Business Tax guides:

Contractor accountant leaning on deskMaking Tax Digital for Income Tax - Complete Guide
Contractor accountant leaning on deskUK Budget 2025 - What You Need to Know
Use of Home Allowance – How Contractors & Sole Traders Can BenefitContractor accountant leaning on deskUse of Home Allowance – How Contractors & Sole Traders Can Benefit
Changes in Tax Codes & Allowances for 2025/26Contractor accountant leaning on deskChanges in Tax Codes & Allowances for 2025/26
An Overview of UK VAT Rules After BrexitContractor accountant leaning on deskAn Overview of UK VAT Rules After Brexit
How to File Self Assessment Tax ReturnContractor accountant leaning on deskHow to File Self Assessment Tax Return
What is the Optimum Director's Salary 2025/26?Contractor accountant leaning on deskWhat is the Optimum Director's Salary 2025/26?
How to File a VAT ReturnContractor accountant leaning on deskHow to File a VAT Return
Contractor accountant leaning on deskHow to Register for Corporation Tax?
Do I Need to Complete a Tax Return - Complete GuideContractor accountant leaning on deskDo I Need to Complete a Tax Return - Complete Guide
Register for PAYE: How and When - PAYE Registration ProcessContractor accountant leaning on deskHow to Register for PAYE?
Contractor accountant leaning on deskSpring Statement 2025 - What it Means for Small Businesses and Contractors?
Do I Pay Tax on Renting Out a Room in My Home?Contractor accountant leaning on deskDo I Pay Tax on Renting Out a Room in My Home?
Last Minute Tax Saving Strategies to Reduce Tax Bill Before 5 AprilContractor accountant leaning on deskLast Minute Tax Saving Strategies to Reduce Tax Bill Before 5 April
Crypto Tax Implications in the UKContractor accountant leaning on deskCrypto Tax Implications in the UK
How Many of Us Are Due A Pay Rise in April 2025?Contractor accountant leaning on deskHow Many of Us Are Due A Pay Rise in April 2025?
Autumn Budget 2024 - Impact on BusinessesContractor accountant leaning on deskAutumn Budget 2024 - Impact on Businesses
Autumn Budget 2024 Predictions - Potential Tax Changes and RumuorsContractor accountant leaning on deskAutumn Budget 2024 Predictions - Potential Tax Changes and Rumuors
Crypto Tax in the UK: A complete guideContractor accountant leaning on deskCrypto Tax UK - Expert Guide for 2026
Working from home tax relief explainedContractor accountant leaning on deskWork from Home Tax Relief - 2026 Guide
Most tax-efficient director's salary and dividends for 2024/25Contractor accountant leaning on deskMost tax-efficient director's salary and dividends for 2025/26
What is Income Tax? How to Set Up a Personal Tax Account?Contractor accountant leaning on deskWhat is Income Tax?
Buying a car through a Limited CompanyContractor accountant leaning on deskBuying a Car through a Limited Company
Key Changes in the Spring and Autumn Budget 2023 for ContractorsContractor accountant leaning on deskKey Changes in the Spring and Autumn Budget 2023 for Contractors
How Soon Should I Submit My 2024/25 Self-Assessment Tax Return?Contractor accountant leaning on deskHow Soon Should I File My Self-Assessment for 2025/26
HMRC Contact Information: How to Contact HMRCContractor accountant leaning on deskHow to Contact HMRC? - HMRC Contact Numbers Guide
GoForma's FAQs around Self Assessment Tax ReturnsContractor accountant leaning on deskGoForma's FAQs around Self Assessment Tax Returns
Potential PM Liz Truss vows to review IR35 contractor lawsContractor accountant leaning on deskPotential PM Liz Truss vows to review IR35 contractor laws
Self-employment tax changes to 2022/23 - thresholds, rates and allowancesContractor accountant leaning on deskSelf-employment tax changes to 2022/23 - thresholds, rates and allowances
Capital Gains Tax, CGT Rates and AllowanceContractor accountant leaning on deskCapital Gains Tax, CGT Rates and Allowance
What is a P60 Form? How to get a P60 form?Contractor accountant leaning on deskP60 Form - Do I Need One? Where do I Get One?
How to pay your Self Assessment TaxContractor accountant leaning on deskHow to pay your Self Assessment Tax
Self Assessment Tax Returns for the Self EmployedContractor accountant leaning on deskSelf Assessment Tax Returns for the Self Employed
Tax on Dividends, Dividend Tax Rates and Dividend AllowanceContractor accountant leaning on deskUK Dividend Tax Rates & Allowances
What are dividends? Limited Company dividends explainedContractor accountant leaning on deskWhat are Dividends? Limited Company Dividends Explained
Unique Taxpayer Reference Number: What is a UTR and how to get oneContractor accountant leaning on deskA Guide to Unique Tax Reference Numbers
Tax return and payment deadlines you need to knowContractor accountant leaning on deskTax return and payment deadlines you need to know
VAT Flat Rate Scheme: 2025 GuideContractor accountant leaning on deskWhat is the VAT Flat Rate Scheme?
How to register for VAT: VAT registration guideContractor accountant leaning on deskHow to Register for VAT?
Claiming mobile phone expenses when Self EmployedContractor accountant leaning on deskSelf Employed Mobile Phone Expenses – What You Can Claim
Self employed advisory fuel rates guideContractor accountant leaning on deskSelf employed advisory fuel rates guide
How to Claim Business Mileage Allowance from HMRCContractor accountant leaning on deskHMRC Mileage Rates and Allowance - How to Claim
Company car tax: The basics explained (and recent changes you need to know)Contractor accountant leaning on deskCompany Car Tax Explained - Rates, Rules and Costs
How to reduce your Corporation Tax billContractor accountant leaning on deskHow to reduce your Corporation Tax bill
What business expenses can Limited Companies claim?Contractor accountant leaning on deskAllowable Expenses for Limited Companies - What You can Claim
Self employed tax obligations guideContractor accountant leaning on deskSelf employed tax obligations guide
Self Employed Expenses & Tax Allowances GuideContractor accountant leaning on deskSelf Employed Expenses & Tax Allowances Guide