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Capital Allowances are the main form of tax relief for businesses investing in commercial property, and they are available to all UK taxpaying entities. This can include acquisitions, refurbishments, construction projects, and plant & machinery. Therefore, allowances would be available to businesses that have incurred capital expenditure on their commercial real estate.
Expenditure incurred by a business is either capital or revenue in nature. Revenue expenditure is generally in relation to repair works, while capital expenditure is most typically on items which provide a lasting benefit for the trade of a business. This expenditure is usually not deductible from trade profits, so a form of tax relief is obtained by way of Capital Allowances.
Tax relief on qualifying plant and machinery expenditure is provided at 18% (main rate pool) or 6% (special rate pool), on a writing down basis, depending on the item.
Assets qualifying for main rate pool include furniture, telecoms, computing equipment and associated items. Assets qualifying for special rate pool include electrical, ventilation and cold water installations.
Additionally, whilst plant and machinery are among the most claimed types of Capital Allowances, there are several other types of assets that also qualify for relief. For example, since October 2018, expenditure incurred on structures and buildings also qualifies for relief (provided at 3% straight line). You can also claim relief on research and development activities.
The result is a reduction in corporation tax or income tax liability. This can represent a significant cash saving for businesses that have recently acquired, constructed, or refurbished commercial property.
One important point: capital allowances are not granted automatically. They must be actively claimed through your tax return for the relevant accounting period.
Capital allowances are applied by placing qualifying expenditure into one of several pools, each with its own rate of tax relief. The type of asset determines which pool it falls into, and therefore how quickly the relief is obtained.
When you incur qualifying capital expenditure, the cost goes into the relevant pool. At the end of your accounting period, you deduct a percentage of that pool from your taxable profits — that is your capital allowance for the year. Some allowances, such as the Annual Investment Allowance (AIA) and Full Expensing, give you 100% relief in the year of purchase. Writing Down Allowances (WDA) spread the relief over time on a reducing balance basis.
HMRC capital allowances are available to any UK taxpaying entity that has incurred qualifying capital expenditure in connection with a business or trade, including:
To be eligible, you must own the asset, use it for business purposes, and have incurred it as capital expenditure rather than a revenue cost. There is no sector restriction, from agriculture to professional services, any UK taxpaying business can claim provided the expenditure qualifies.
A wide range of assets qualify. Plant and machinery capital allowances cover the broadest category, including:
Property tax capital allowances also apply via the Structures and Buildings Allowance (SBA) for building expenditure from October 2018. Research and development assets can attract RDAs at 100% first-year relief.
What does not qualify: land, the structural fabric of buildings, most residential property fixtures, stock-in-trade, and costs already claimed as revenue expenses.
There are several types of capital allowances available to UK businesses:
Annual Investment Allowance (AIA): 100% relief on qualifying plant and machinery up to £1 million per year. Available to companies, sole traders, and partnerships where all members are individuals. Cars excluded. For most SMEs, the AIA will cover all qualifying expenditure in a given year.
Full Expensing: Permanent from April 2023. 100% first-year relief for companies on new, unused main rate plant and machinery with no monetary cap. 50% first-year allowance for special rate assets. Companies only. This is the main relief for companies with expenditure above the AIA limit.
40% First Year Allowance: Available on qualifying new and unused main rate plant and machinery where Full Expensing is unavailable — including leasing companies and unincorporated businesses. Cars excluded. To qualify for the 40% first-year allowance, plant or machinery must have been bought on or after 1 January 2026.
Writing Down Allowances (WDA): Main rate pool: 14% per year. Special rate pool: 6% per year. Applied on a reducing balance basis.
Structures and Buildings Allowance (SBA): 3% straight-line relief per year on qualifying construction or renovation of non-residential buildings, for expenditure from 29 October 2018.
Research and Development Allowances (RDAs): 100% first-year relief on capital expenditure on assets used for R&D purposes.
Zero-emission cars / EV charging points: 100% first-year allowance until 31 March 2027 (companies) / 5 April 2027 (unincorporated businesses).
A summary of the main current rates:
Getting this wrong or missing assets entirely is the most common reason businesses under-claim. For commercial property in particular, embedded fixtures are routinely overlooked without specialist input.
The Annual Investment Allowance limit is £1 million per year, confirmed for the duration of the current Parliament. It covers most capital expenditure for SMEs in a single accounting period. To claim the AIA, include the qualifying expenditure in the capital allowances section of your Company Tax Return (CT600) or Self Assessment return for the period of purchase. AIA must be claimed in the period it is incurred.
AIA gives 100% relief on up to £1 million of qualifying plant and machinery in the year of purchase. All business types. Excludes cars.
Full Expensing gives 100% relief on qualifying new, unused main rate plant and machinery with no monetary cap. Companies only. 50% for special rate assets.
WDA applies to expenditure not covered by AIA or Full Expensing. 14% for main rate; 6% for special rate, on a reducing balance basis.
In practice, most businesses claim AIA or Full Expensing on new purchases to get the relief upfront. WDA then applies to any remaining balance in the pool from previous years.
Most businesses significantly under-claim tax relief on commercial property - not because the relief does not exist, but because identifying embedded fixtures requires expertise that sits outside standard accounting. Heating systems, electrical installations, ventilation, lifts - these are all qualifying assets that rarely appear on a standard fixed asset register.
A specialist will survey your property, categorise qualifying items into the correct pools, and prepare a fully disclosed report for HMRC. This is especially important when acquiring second-hand commercial property, where Section 198 elections must be agreed within two years of completion. Without specialist input, it is common to leave tens or even hundreds of thousands of pounds of qualifying expenditure unclaimed.
Plant and machinery capital allowances (PMAs) are the most commonly claimed type in the UK, covering office furniture, computers, telecoms, commercial vehicles, and — critically for property owners — embedded fixtures such as heating, electrical systems, ventilation, and lifts.
Property tax capital allowances refer to capital allowances available on expenditure connected to commercial property — including acquisition, construction, or refurbishment. The main opportunity lies in identifying qualifying plant and machinery embedded within the building that would not normally appear on a standard asset register.
A capital allowances survey is carried out by a specialist — typically a Chartered Quantity Surveyor with tax expertise — to identify qualifying plant and machinery embedded within a commercial property. It involves a physical inspection, a review of cost documentation, and a detailed categorisation of expenditure by allowance pool. The survey report is submitted to HMRC as supporting evidence.
Research and Development Allowances (RDAs) provide 100% first-year capital allowances relief on capital expenditure on assets used in R&D activities. They can be claimed alongside R&D tax credits and have no monetary cap, making them particularly valuable for businesses with high R&D infrastructure costs, such as laboratory equipment or purpose-built research facilities.
The super-deduction (April 2021 to March 2023) provided 130% relief on qualifying main rate plant and machinery. Full Expensing, permanent from April 2023, provides 100% first-year relief with no monetary cap. Both apply to companies only on new, unused main rate assets.
Car writing down allowances are the way businesses claim tax relief on cars over time. Cars are excluded from AIA and Full Expensing. The rate depends on CO2 emissions: zero-emission cars qualify for 100% first-year allowance until March 2027; cars at 50g/km or below enter the main rate pool (14%); cars above 50g/km enter the special rate pool at 6% per year.
Thinking of preparing your R&D Tax Credit claim in-house? Find out why doing it yourself can carry risks, from underclaiming and administrative errors to HMRC compliance checks, and why using an R&D tax specialist could be worthwhile.
This article explains how technological uncertainty is assessed under the DSIT Guidelines, how it differs from technical complexity, and why identifying and resolving it is fundamental to a successful R&D tax claim.
Find out who can claim capital allowances in the UK, and which assets and property types qualify.
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