Capital Allowances on Your CT600 — AIA, WDA, and Full Expensing Explained

What Are Capital Allowances?

When your company buys equipment, vehicles, or machinery for business use, you can't deduct the full cost as an expense in your profit and loss account. Instead, you claim capital allowances — a tax relief that lets you write off the cost against your taxable profits over time (or in full, depending on the type).

Capital allowances are one of the most valuable tax reliefs available to UK companies. Understanding them can significantly reduce your corporation tax bill.

Types of Capital Allowances

Annual Investment Allowance (AIA)

The AIA gives 100% first-year relief on qualifying plant and machinery purchases, up to £1,000,000 per year.

For most small companies, this means you deduct the full cost of equipment in the year you buy it.

Qualifying purchases:

• Computers, laptops, monitors
• Office furniture (desks, chairs)
• Tools and machinery
• Commercial vehicles (vans, trucks — not cars)
• Security systems
• Air conditioning and heating

Not qualifying:

• Cars (separate rules)
• Buildings (separate rules via SBA)
• Land

Example: You buy a £5,000 laptop and £2,000 office furniture = £7,000 AIA claim. This reduces your taxable profit by £7,000, saving £1,330 in tax (at 19%) or up to £1,750 (at 25%).

Writing Down Allowance (WDA)

If you spend more than the AIA limit (unlikely for small companies) or have items that don't qualify for AIA, you claim WDA instead:

WDA is calculated on the reducing balance — 18% of whatever's left in the pool each year.

Full Expensing (from April 2023)

Companies can claim 100% first-year allowance on qualifying main rate plant and machinery with no upper limit. This is even more generous than AIA for large purchases.

For most small companies, AIA already covers everything. Full expensing matters more for larger businesses spending over £1M.

Zero-Emission Vehicles

100% first-year allowance on new zero-emission cars and goods vehicles. This is one of the few ways to get full relief on a car purchase.

For other cars, the allowance depends on CO2 emissions:

• 0 g/km: 100% first-year allowance
• 1-50 g/km: 18% WDA (main pool)
• Over 50 g/km: 6% WDA (special rate pool)

Structures and Buildings Allowance (SBA)

3% per year on the cost of constructing or renovating commercial buildings. This is a flat-rate allowance (not reducing balance), claimed over approximately 33 years.

Capital Allowances on Your CT600

The relevant CT600 boxes for capital allowances:

For a typical small company claiming AIA, you'll mainly use Box 690 (AIA amount) and possibly Box 710 (main pool allowances).

Worked Example

Scenario: IT contractor, £80,000 turnover, buys:

• MacBook Pro: £3,000
• Monitor and desk: £1,500
• Office chair: £800

Total qualifying expenditure: £5,300

CT600 entries:

• Box 690 (AIA): £5,300
• Trading profit before allowances: £45,000
• Trading profit after allowances: £39,700

Tax saving: £5,300 × 19% = £1,007

Without claiming capital allowances, you'd pay £1,007 more in corporation tax. Always claim.

Balancing Charges

If you sell an asset you've previously claimed allowances on, you may need to add a balancing charge — effectively giving back some of the tax relief.

Example: You claimed £3,000 AIA on a laptop. Two years later, you sell it for £1,000. The £1,000 is a balancing charge that increases your taxable profit.

Record Keeping

HMRC requires you to keep records of:

• What you bought and when
• How much you paid
• The business purpose
• Any disposals

Keep receipts and invoices for at least 6 years from the end of the accounting period.

Claiming Capital Allowances with Taxpipe

Taxpipe handles capital allowances in the CT600 wizard:

1. Enter your capital purchases
2. Select the allowance type (AIA, WDA, etc.)
3. Taxpipe calculates the relief and fills the correct CT600 boxes
4. iXBRL accounts include the capital allowances disclosure

Calculate your tax including capital allowances →