Writing down allowances: rates, pools and 2026 changes

How writing down allowances work

Writing down allowances let a business deduct a percentage of the value of certain items from its profits each year, with items grouped into pools by rate. They can be claimed if plant and machinery does not qualify for another allowance, or if there is value remaining after claiming the maximum amount of another allowance. ^[1]

A business might be able to claim more tax relief through other routes to claiming capital allowances, depending on the item. If an item qualifies for more than one capital allowance, the business can choose which one to use. The guide to the Annual Investment Allowance covers the allowance often looked at first.

Main, special rate and single asset pools

To claim, items are grouped into pools depending on which rate they qualify for, and the claim is worked out separately for each pool. The main pool has a rate of 14% from April 2026 and 18% before, the special rate pool has a rate of 6%, and in single asset pools the rate depends on the item. ^[2]

The main rate applies to plant and machinery a business buys, unless the items need to go into the special rate pool or a single asset pool. Items for the special rate pool include integral features such as lifts, heating, air-conditioning, hot and cold water systems (but not toilet and kitchen facilities) and electrical and lighting systems, along with solar panels and thermal insulation added to a building.

Items with a long life (a useful life of at least 25 years from new) go in the special rate pool where the value of all long-life items bought in an accounting period is more than £100,000, a limit adjusted for accounting periods of more or less than 12 months. Where that value totals £100,000 or less, the costs go in the main rate pool unless another factor qualifies them as special rate, such as being an integral feature, or the business is a partnership with a limited company as a member, which puts all long-life costs in the special rate pool.

Single asset pools may be needed for short life assets, which get the main rate, and for items a sole trader or partnership uses outside the business. The guide to capital allowances on cars covers how cars are pooled.

For an item in a single asset pool because it is used outside the business, a sole trader or partnership reduces the amount it claims by the amount of private use, but still deducts the full calculated allowance from the pool to get the closing balance.

The 2026 main rate cut and hybrid rates

The main rate of writing down allowance changed from 18% to 14% on 1 April 2026 for Corporation Tax and on 6 April 2026 for Income Tax. ^[3]

If an accounting period includes the date the rate changed, a hybrid rate is worked out for that period, based on how much of the period falls before the change and how much after. The days before the change are divided by the total days in the period and multiplied by 18, the days from the change are divided by the total and multiplied by 14, and the two results are added and rounded up to 2 decimal places.

A company paying Corporation Tax with an accounting period from 1 January 2026 to 31 December 2026 has 90 days before 1 April 2026 and 275 days from it, so its hybrid rate for that period is 14.99%.

A 40% first-year allowance is available for plant or machinery bought on or after 1 January 2026 that is new and unused, qualifies for the main rate of writing down allowance and is not a car, with writing down allowances claimable on the remaining 60% of the cost in the next accounting period.

Working out the allowance on a pool

For each pool, the closing balance from the last accounting period is the starting point; the value of qualifying items bought or given in the period is added, with VAT included only if the business is not VAT registered, and the value of items sold or disposed of is deducted. The pool's rate is applied, and the allowance is deducted to give the closing balance, known as the tax written down value.

With an opening main pool balance of £9,000, a machine bought for £1,200 and a desk sold for £200, the pool stands at £10,000, the allowance at 14% is £1,400 and the closing balance is £8,600.

If the balance in the main or special rate pool is £1,000 or less before the allowance is worked out, the full amount can be claimed as a small pools allowance, which does not apply to single asset pools and is claimed instead of writing down allowances, not as well as them. The £1,000 amount is adjusted if the accounting period is more or less than 12 months.

For accounting periods less than a calendar year the writing down allowance is reduced, and for periods longer than a calendar year but less than 18 months it is increased. ^[4]

Items already claimed on using annual investment allowance or first year allowances are recorded in the pool they qualify for, and if the full cost was claimed their value is written down as zero. The value deducted for items sold or disposed of is only for those that originally qualified for that pool.

What can you not claim capital allowances on?

Plant and machinery allowances cannot be claimed on land, although structures and buildings allowance may be available on structures and buildings. The 6% special rate cannot be claimed in full on buildings themselves, but an allowance of 3% may be available on money spent buying, constructing or renovating some non-residential buildings.

A sole trader or partnership using the cash basis can only claim capital allowances on business cars. An employee cannot claim capital allowances for cars, motorbikes and bicycles used for work, but may be able to claim for business mileage and fuel costs. Cars, items also used outside the business and special rate items cannot be treated as short life assets.

What is the 4 month rule for capital allowances?

The 4 month rule sets when an item counts as bought: it is when the contract was signed if payment is due within less than 4 months, or when payment is due if it is due more than 4 months later.

Hire purchase works differently: when the item starts being used, the payments to be made under the contract can be claimed, but not the interest payments. Because the purchase date decides which accounting period an item falls in, it could affect which rate or allowance applies.

Claiming part of the cost with writing down allowances

First-year allowances such as the 40% first-year allowance must be claimed in the accounting period the item was bought, if the business wants to claim them. If a business does not want to claim the full value as annual investment allowance or a first-year allowance, it can claim part of it using writing down allowances at any time, as long as it still owns the item. ^[1]

A business does not have to claim the full writing down allowance it is entitled to, and any part not claimed stays in the closing balance. Writing down allowances are claimed on the tax return.