Taxation (UK) · Property and investment income

Capital Allowances on Let Property and Structures

Updated 11 October 2026 · Fact-checked

Capital allowances give tax relief for capital spending on plant and machinery and on non-residential buildings. Let-property businesses claim AIA (100% up to £1,000,000), writing down allowances (18% main pool, 6% special rate pool) and 3% straight-line SBA. Plant in a dwelling house is excluded.

Understand Capital Allowances on Let Property and Structures

Accounting depreciation is not deductible for tax. Instead, the tax system gives its own relief for capital spending: capital allowances. They are deducted in computing the profits of the property business, so they reduce taxable property income.

There are two main types of relief. Plant and machinery allowances cover items such as lifts, fire alarms, air conditioning and equipment. The structures and buildings allowance (SBA) covers the construction cost of a qualifying non-residential building.

For plant and machinery, spending goes into a pool. The main pool gets a writing down allowance (WDA) of 18% a year on the reducing balance. The special rate pool gets 6%. Integral features (such as lifts and electrical systems) and cars with CO2 emissions over 50 grams per kilometre go in the special rate pool. To get faster relief, you claim the annual investment allowance (AIA): 100% relief on spending up to £1,000,000 in a 12-month period. Spending covered by AIA does not go into a pool. Any spending above the AIA limit goes to the pool and gets WDA.

Companies can also claim enhanced capital allowances: a 100% first year allowance (full expensing) on new main pool plant, and a 50% first year allowance on new special rate pool plant. These are for companies only, not sole traders or partnerships. They are for new, unused plant, and are not available for plant bought to lease to others.

The key property restriction: you cannot claim plant and machinery allowances on items in a dwelling house that is let. Furniture in a residential let gets different relief, not capital allowances. Plant in commercial let property, and in the common areas of residential blocks, can qualify. The SBA is a flat 3% a year on the construction cost of non-residential structures and buildings. It excludes land, and it excludes residential property.

Key rules to remember

Main pool WDA: WDA = 18% × (pool balance b/f + additions not covered by AIA or FYA − disposal proceeds); Reducing balance. Time apportion for a period shorter or longer than 12 months.
Special rate pool WDA: WDA = 6% × (pool balance b/f + additions − disposal proceeds); Integral features, long-life assets and cars with CO2 over 50 g/km.
Annual investment allowance: AIA = 100% × qualifying expenditure, up to £1,000,000 per 12-month period; Not available on cars. Adjust the limit by months ÷ 12 for a short or long period. Allocate it to special rate pool spending first.
Enhanced allowances (companies only): Main pool new plant: 100% FYA. Special rate pool new plant: 50% FYA; New and unused plant only, and not plant for leasing. Any remaining special rate balance gets 6% WDA.
Cars: New zero-emission: 100% FYA. CO2 1 to 50 g/km: 18%. CO2 over 50 g/km: 6%; No AIA on cars. Second-hand zero-emission cars get 18%.
Structures and buildings allowance: SBA = 3% × qualifying construction cost × months in use ÷ 12; Straight line, not reducing balance. Land cost is excluded. Non-residential only. Starts when the building is first brought into use.
Balancing adjustment: Balancing allowance or charge = pool balance − disposal proceeds, in the final period; On cessation there is no WDA or AIA in the final period. Proceeds are limited to original cost.

How to solve Capital Allowances on Let Property and Structures questions

Use the same sequence for every capital allowances question on let property. It keeps the working tidy and the marks easy to find.

1Check the property type. Is the plant in a dwelling house that is let? If so, no plant and machinery allowances. If it is commercial property or the common parts of a residential block, continue.
2Identify the business and the period. Individual or company? Is the period 12 months, or shorter or longer? You need this for time apportionment and for deciding if enhanced allowances apply.
3Split additions into categories: main pool, special rate pool, cars, and any building cost for SBA. Remove land and any non-qualifying items.
4Apply the AIA. Use it on special rate pool additions first, then main pool additions, up to £1,000,000 (adjusted for the period length). Cars never qualify.
5For companies, apply the 100% or 50% first year allowances to new qualifying plant not covered by AIA. Remember the exclusion for plant bought for leasing. Individuals skip this step.
6Do the pool workings in columns: balance b/f, additions, disposals, WDA at 18% or 6%, balance c/f. Remember disposal proceeds are capped at cost.
7Calculate the SBA separately at 3% of qualifying cost, time apportioned from the date the building is first used.
8Total all allowances and deduct them from property income. Show the total clearly.

Quickest way: Three-line allowance check

When to use it: Use it for objective test questions and for the planning stage of a Section C answer.

Ask: dwelling house? If yes, zero. Then ask: person or company? Only companies get 100% or 50% first year allowances.
Put the AIA against special rate pool spending first, because those assets only get 6% WDA. Anything left over then covers main pool spending.
Use 18% for the main pool, 6% for the special rate pool, and 3% flat on building cost excluding land. Multiply by months ÷ 12 if the period is not 12 months, or for SBA in the first year.

Common mistakes in Capital Allowances on Let Property and Structures

Claiming plant and machinery allowances on furniture and appliances in a let house or flat.
Students see the word plant and forget that the dwelling house exclusion applies to lets.
Fix: Check the property type first. Residential dwelling lets get no plant allowances. Common areas and commercial property can qualify.
Including the cost of land in the SBA calculation.
The question gives one purchase price for the building and the plot.
Fix: Use only the qualifying construction cost. Strip out land, and strip out any element that is plant.
Giving the AIA to main pool additions first.
It looks natural to take pools in the order listed.
Fix: Allocate the AIA to special rate pool additions first. This maximises relief because the leftover special rate balance would only get 6% WDA.
Giving a sole trader or partnership 100% full expensing.
Students mix up the enhanced allowances for companies with the AIA.
Fix: Enhanced allowances are for companies only. Unincorporated businesses use the AIA, then WDA.
Forgetting to time apportion the AIA, WDA or SBA.
Students assume every period is 12 months.
Fix: Underline the period length. Multiply the AIA limit and the WDA by months ÷ 12. Apportion SBA by months in use in the period.
Claiming AIA on a car, or the 100% FYA on a car with emissions.
Students treat cars like other plant.
Fix: Cars never get AIA. Use the car rates: 100% FYA only for new zero-emission cars, otherwise 18% or 6% depending on CO2.

Worked examples

Example 1

Anika is an individual who lets commercial units. For the 12 months to 5 April 2027 her property business bought new lifts and similar integral features for £700,000 and other machinery for £500,000. The main pool balance brought forward is £30,000. The special rate pool balance brought forward is nil. Calculate the total capital allowances for the year.

Show the solution

Anika is an individual, so no first year allowances. The property is commercial, so plant qualifies. The period is 12 months, so the full AIA of £1,000,000 is available.
Allocate the AIA to special rate pool additions first: £700,000. Remaining AIA: £1,000,000 − £700,000 = £300,000.
Use the remaining £300,000 against main pool additions of £500,000. The excess is £500,000 − £300,000 = £200,000, which goes into the main pool.
Main pool: balance b/f £30,000 + excess additions £200,000 = £230,000. WDA at 18% = £41,400. Balance c/f = £188,600.
Special rate pool: no balance remains, so no WDA.
Total allowances = AIA £1,000,000 + WDA £41,400 = £1,041,400.

Answer: Total capital allowances are £1,041,400, deducted from property income. The main pool carries forward £188,600.

Example 2

Greenfield Ltd, a property company, has a 12-month accounting period to 31 March 2027. On 1 July 2026 it first brought into use a new non-residential building. The total price was £1,200,000, of which £300,000 was land. The remaining £900,000 was qualifying construction cost, with no plant element. Calculate the structures and buildings allowance for the period.

Show the solution

The building is non-residential, so the SBA is available. Land cost of £300,000 is excluded.
Qualifying cost is £900,000. The annual rate is 3%, so a full year gives £27,000.
The building was in use from 1 July 2026 to 31 March 2027, which is 9 months.
SBA = £900,000 × 3% × 9 ÷ 12 = £27,000 × 0.75 = £20,250.

Answer: The SBA for the period is £20,250. It is a straight-line allowance, so a full year of £27,000 is claimed in each later 12-month period for the remaining tax life of the building.

Exam tips

Read the property type in the first line of the scenario. A dwelling house let to tenants removes plant and machinery allowances, and many Section A and B questions test only this.
Show the pool columns even in a short answer. Marks go for the AIA allocation, the 18% or 6% rate, and the balance carried forward.
Check the entity. If it is a company, ask whether the plant is new and not for leasing before using 100% or 50% first year allowances.
For SBA, circle the date the building was first brought into use and count months to the period end. Remove land cost every time.
Objective test questions are all or nothing, so do the arithmetic fully and check the period length before choosing the final answer.

Practice questions from Property and investment income

Capital Allowances on Let Property and Structures in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

ACCA Strategic ProfessionalCapital Allowances on Plant, Machinery and Structures

Capital Allowances on Let Property and Structures: frequently asked questions

What is the difference between the annual investment allowance and writing down allowance?

The AIA gives 100% relief in the year of purchase on spending up to £1,000,000 in a 12-month period. WDA is a reducing balance allowance of 18% (main pool) or 6% (special rate pool) each year on the pool balance. Spending above the AIA limit goes into a pool and gets WDA.

Who can claim full expensing and the 50% first year allowance?

Only companies. Full expensing is a 100% first year allowance on new main pool plant. The 50% first year allowance is for new special rate pool plant. Neither applies to second-hand plant or plant bought to lease to others, and individuals and partnerships use the AIA instead.

Does the structures and buildings allowance include the cost of land?

No. The SBA is based on qualifying construction cost only. It is 3% a year on a straight-line basis, and it applies to non-residential structures and buildings, not residential property.

Can a landlord claim capital allowances on furniture in a let flat?

No. Plant and machinery allowances are not available for items in a dwelling house that is let. Commercial lets and the common areas of residential blocks can qualify, so check what the question describes.