Capital allowances
Capital allowances give a taxpayer relief for certain types of capital expenditure, as shown in the table below.
Capital allowance rates
The following capital allowances apply.
| Capital type | Allowance rate | |
|---|---|---|
| Machinery and plant, normal rate | 25% | Reducing balance |
| Machinery and plant, first year allowance *1 | 50% | Permanent allowance |
| Machinery and plant, long life assets *2 | 6% | Reducing balance |
| Motor cars | 25% | Reducing balance (max £3,000 pa) |
| Low emission and electric cars | 100% | Cars registered on or after 17th April 2002 |
| Industrial buildings and qualifying hotels | 4% | Of cost per annum |
| Commercial/industrial buildings in an enterprise zone | 100% | |
| Agricultural buildings | 4% | Of cost per annum |
| Scientific research | 100% | |
| Know how | 25% | Reducing balance |
| Patent rights | 25% | Reducing balance |
| Cars with low carbon dioxide emissions (not more than 120 gm/km driven) *3 | 100% | |
| Natural gas and hydrogen refuelling equipment *3 | 100% | |
| Water efficient investments *4 | 100% | |
Notes:
*1 Applies to small and medium sized businesses (as defined by the Companies Act). Cars and certain other assets are excluded. Rate normally 40%, increased to 50% for 1 year from 6 April 2006.
*2 Assets with a working life of 25 years or more unless expenditure on such assets is below £100,000 in the period.
*3 On expenditure between 17th April 2002 and 31 March 2008.
*4 On expenditure from 1 April 2003.
100% first year capital allowances will be introduced for:These allowances will apply to expenditure incurred between 17 April 2002 and 1 April 2008.
- new low emission cars registered on or after 17 April 2002, and
- plant and machinery to refuel vehicles with natural gas or hydrogen fuel.
This page was last reviewed on 16 April 2007. The information may not reflect changes in legislation made after this date.
This is only a guide to your tax position and should not be relied on in place of professional accounting or tax advice. Any calculated figures are illustrative and are based on the data you provided.
