Full expensing, the Annual Investment Allowance or writing down allowances — which you get depends on what you are buying and who is buying it. Talk to Buzz before a large purchase.
Cars are excluded from both full expensing and the AIA.
Cars run on their own rules based on CO2 emissions. Full expensing is for companies buying new and unused assets only; sole traders and partnerships use the Annual Investment Allowance. Disposals of assets that had full expensing trigger an immediate balancing charge. Talk to Buzz before you commit.
What you're buying
Enter the details, then click Calculate to see which relief applies.
The basics
Which allowance applies
When you buy equipment for a business you usually cannot deduct the cost like a normal expense. You claim capital allowances instead, and which one you get changes the timing enormously — sometimes all of it this year, sometimes a fraction a year for a decade.
Full expensing. A 100% first-year allowance on new main-rate plant and machinery, and 50% on new special-rate assets. Uncapped, and permanent. Two conditions people miss: it is for companies only, and the asset must be new and unused.
The Annual Investment Allowance still matters. The AIA gives 100% relief on up to £1,000,000 a year, covers both pools, and — unlike full expensing — is available to sole traders and partnerships and to second-hand assets. For most small businesses it does everything full expensing would have done.
Where the money gets stuck. Special rate assets. A fit-out's lighting, wiring, heating and air conditioning are integral features, and once the AIA is used up they attract 6% a year, which takes decades to relieve. Pointing the AIA at special-rate spend first, and leaving main-pool spend to full expensing, is usually the better order.
And since 1 January 2026, a 40% first-year allowance. New main-rate plant and machinery attracts a 40% first-year allowance, and unlike full expensing it is not restricted to companies — unincorporated businesses and leasing businesses can use it too. Below the AIA limit it rarely matters, because the AIA gives 100%. Above it, it is the difference between relieving 40% of the excess this year and 14% of it.
The main pool writing down allowance also fell from 18% to 14% in April 2026, which makes getting the up-front allowances right worth more than it used to be.
These stack in an order. The AIA is worth 100% but is capped; the first-year allowances are uncapped but worth less. So on a large or mixed purchase the AIA should be pointed at whatever would otherwise attract the slowest relief — normally special-rate spend at 6% — and the balance left to full expensing or the 40% allowance. Picking a single rate for the whole invoice leaves money behind.
Frequently asked questions
Common questions about capital allowances
What is the difference between full expensing and the AIA?
Full expensing gives 100% relief, is uncapped, and is restricted to companies buying new and unused main-rate plant and machinery (50% for new special-rate). The Annual Investment Allowance gives 100% on the first £1,000,000 a year, covers both pools, and is open to sole traders and partnerships and to second-hand assets. For most small businesses the AIA does everything full expensing would have done, and does it for second-hand kit too.
Can I claim both in the same year?
Yes, and on a large purchase you generally should. They apply to different pounds of the same spend. The sensible order is to use the AIA against expenditure that would otherwise attract the slowest allowance — special-rate integral features at 6% — and leave main-rate spend to full expensing or the 40% first-year allowance, which relieve it well without using up the cap.
What is the 40% first-year allowance?
From 1 January 2026, new main-rate plant and machinery attracts a 40% first-year allowance. The important part is who can use it: unlike full expensing it is not companies-only, so sole traders, partnerships and leasing and hire businesses can claim it. Second-hand assets, cars and assets for overseas leasing are excluded. Below the AIA limit it is usually irrelevant; above it, it matters a great deal.
Why can't I claim for a car?
Cars are excluded from full expensing, from the first-year allowances and from the AIA, and run on their own CO2-based rules instead. Zero-emission cars currently get a 100% first-year allowance; other cars go into the main or special rate pool depending on emissions and are relieved at 14% or 6% a year. Vans, lorries and most commercial vehicles are not cars for this purpose and do qualify — which is why the classification of a vehicle is worth getting right.
What are integral features and why do they matter?
Electrical and lighting systems, cold water systems, space and water heating, air conditioning, lifts and escalators. They are special-rate expenditure, relieved at 6% a year once the AIA and first-year allowances are used up — which takes decades. A shop or office fit-out is usually a mix of main-rate and special-rate spend, and how the invoice is analysed makes a very large difference to when you get the money back.
What happens when I sell an asset I claimed on?
You bring in a balancing adjustment. For assets that had full expensing this is immediate and can be unwelcome: an asset that got 100% relief generates a balancing charge on disposal equal to the proceeds, taxed in that year. That is not a reason to avoid the relief, but it belongs in the plan if you buy equipment on a short replacement cycle.
Does the AIA limit apply per company or per group?
It is shared. Groups of companies and companies under common control get one £1,000,000 allowance between them, and there are similar rules for related unincorporated businesses. Assuming each company has its own limit is a common and expensive error in a group structure.
Does timing a purchase matter?
Considerably. The AIA is an annual limit, so a £1.4m spend in one accounting period wastes part of the relief that two periods would have absorbed in full. Moving a purchase either side of a year end — or accelerating one into a period where the AIA is unused — can be worth six figures. This is one of the few areas where a phone call before you commit reliably pays for itself.
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A company spends £1,400,000 fitting out new premises: £900,000 on new machinery and equipment (main rate) and £500,000 on lighting, wiring, heating and air conditioning (special rate).
Point the AIA at the main-rate spend and the special-rate balance crawls:
AIA against main-rate spend£900,000
AIA remaining, against special rate£100,000
50% first-year allowance on the remaining £400,000£200,000
Allowance this year£1,200,000
Now point the AIA at the special-rate spend instead, and let full expensing take the main-rate spend it relieves at 100% anyway:
AIA against special-rate spend£500,000
Full expensing on £900,000 of new main-rate spend£900,000
Allowance this year£1,400,000
Same invoice, same year, £200,000 more relief — £50,000 of cash at a 25% tax rate — purely from the order the allowances were applied in. The remaining £200,000 in the first version does not disappear, but it is relieved at 6% a year, which takes the better part of a working lifetime.
What to do with the answer
Before a large purchase
Get the invoice analysed properly. A fit-out billed as one line is a fit-out nobody can allocate. Main-rate and special-rate spend need separating before the allowances can be pointed anywhere sensible.
Use the AIA on the slowest-relieving spend. Special-rate integral features at 6% a year are what you want the £1,000,000 aimed at, not equipment that full expensing would have covered at 100%.
Check whether you share the limit. Groups and companies under common control get one £1,000,000 between them, not one each.
Look at the timing. The AIA is annual. Splitting a large purchase across two accounting periods, or pulling one forward into a period where the allowance is unused, can be worth a great deal.
Remember the disposal. Assets that had full expensing trigger an immediate balancing charge when sold. Fine if you plan for it, unpleasant if it arrives as a surprise.
Planning a big purchase or a fit-out? Talk to us first, not after.
