Advanced Taxation (UK) · Income tax: property and investment income

Capital Allowances on Plant, Machinery and Structures

Updated 11 October 2026 · Fact-checked

Capital allowances give tax relief on qualifying spending on plant, machinery and some structures. Put spending into the main pool (18%) or special rate pool (6%), claim the annual investment allowance (100% up to £1,000,000) or company enhanced allowances first, then writing down allowance on the balance. Structures and buildings allowance gives 3% straight line on construction cost.

Understand Capital Allowances on Plant, Machinery and Structures

Accounting depreciation is not deductible for tax. Instead, the tax system gives its own relief on capital spending, called capital allowances. You add back depreciation in the adjustment of profits and deduct capital allowances instead.

Most plant and machinery is pooled. The main pool gets a writing down allowance (WDA) of 18% a year on the reducing balance. The special rate pool gets 6%. The special rate pool holds integral features, long-life assets and cars with CO2 emissions over 50 grams per kilometre. Cars with emissions of 1 to 50 grams per kilometre go in the main pool.

Some spending gets faster relief. The annual investment allowance (AIA) gives 100% relief on up to £1,000,000 of qualifying spending a year. It is available to individuals, partnerships and companies. It is not available on cars. Companies also get enhanced allowances on new, unused assets: the tables give a 100% first year allowance on main pool plant and a 50% first year allowance on special rate pool plant. The other 50% of the special rate spending goes into the special rate pool and earns the 6% WDA. Individuals do not get these company-only allowances. New cars with zero CO2 emissions get a 100% allowance for any taxpayer.

The structures and buildings allowance (SBA) is different. It covers the construction cost of qualifying non-residential structures and buildings. It is a straight line allowance of 3% a year. It does not cover land, and it is not given on dwellings. This matters for property investors who own commercial premises.

The key difference between the AIA and the company first year allowances: the AIA is capped at £1,000,000 and is open to all businesses. The first year allowances are for companies and apply to new, unused plant. Always check who the taxpayer is and whether the asset is new.

Key rules to remember

Main pool WDA: WDA = 18% × (b/f balance + additions not relieved by AIA or FYA − disposal proceeds); Reducing balance. Time-apportion for a period that is not 12 months.
Special rate pool WDA: WDA = 6% × (b/f balance + additions not relieved by AIA or FYA − disposal proceeds); Holds integral features, long-life assets and cars over 50g/km.
Annual investment allowance: AIA = 100% × qualifying spending, up to £1,000,000; Not available on cars. Limit is time-apportioned for a period that is not 12 months. Allocate AIA to special rate pool additions first because they get the lower WDA.
Company enhanced allowances: Main pool FYA 100%; special rate pool FYA 50% (new, unused assets, companies only); The 50% not relieved moves to the special rate pool and gets the 6% WDA.
Car rates: New zero CO2 car: 100%. CO2 1–50g/km: 18%. CO2 over 50g/km: 6%. Second-hand zero CO2 car: 18%; No AIA on cars. Use the table ACCA gives you.
Structures and buildings allowance: SBA = 3% × qualifying construction cost per year (straight line); Excludes land. Starts when the building is first brought into qualifying use. Not available on dwellings.
Balancing adjustments: Pool balance negative after deducting proceeds: balancing charge in any period. Pool balance positive on cessation: balancing allowance; A negative pool balance gives a balancing charge whenever it arises, not only on cessation. A balancing allowance on a pool arises only when the trade ceases. Otherwise a positive balance stays in the pool and earns the WDA.

How to solve Capital Allowances on Plant, Machinery and Structures questions

Use the same layout every time. A clear pool computation earns the technical marks even if one figure slips.

1Identify the taxpayer (individual, partnership or company) and the length of the accounting period or basis period. This decides whether enhanced allowances are available and whether you must time-apportion.
2Sort each asset into main pool, special rate pool, car, or private-use asset. Check whether it is new and unused, and whether it is a car.
3Claim the AIA first. Cap it at £1,000,000 (time-apportioned if needed). Allocate it to special rate pool additions first, then main pool additions. Never apply it to cars.
4For companies, claim the first year allowances on any remaining new, unused main pool plant (100%) and special rate plant (50%). Move the unrelieved balances into the pools.
5Build each pool: brought forward balance, add additions not fully relieved, deduct disposal proceeds (limited to original cost), then calculate the WDA at 18% or 6%. Carry forward the balance.
6Calculate the SBA separately: 3% of qualifying construction cost for the period the building was in qualifying use.
7Total all allowances and state the deduction from trading profits (or property business profits). Add a brief note on any judgement, such as why a company chose a particular allocation.

Quickest way: Pool columns in one pass

When to use it: Use when the question lists several additions, a disposal and an AIA limit, and you have about 10 minutes.

Draw three columns: AIA/FYA, main pool, special rate pool. Add a total allowances line at the bottom.
Write the brought forward balances first, then enter each addition in its correct column.
Put the AIA against special rate additions first, then main pool additions. Show the amount used so you can prove it does not exceed £1,000,000.
Enter any car outside the AIA column, in the pool its CO2 figure dictates.
Deduct disposal proceeds in the pool, take 18% or 6%, and add AIA, FYA and WDA across for the total. Do the SBA last on one line.

Common mistakes in Capital Allowances on Plant, Machinery and Structures

Claiming the AIA on a car.
Students see a large purchase and assume everything qualifies for AIA.
Fix: Cars never get AIA. Put them in the main pool (1–50g/km) or special rate pool (over 50g/km), unless the new car has zero emissions and gets the 100% allowance.
Giving individuals or partnerships the 100% or 50% company enhanced allowances.
The AIA and the company first year allowances are confused because both give 100% relief.
Fix: Enhanced allowances are for companies only and for new, unused assets. For an individual, spending above the AIA goes into the pool at 18% or 6%.
Applying the AIA to main pool additions first.
Students follow the order of the list in the question.
Fix: Relief on special rate pool assets is only 6%, so use the AIA there first. This gives the largest total allowance.
Forgetting to time-apportion for a short or long period.
Students copy 18% and £1,000,000 without checking the period length.
Fix: Scale the AIA limit and the WDA by months ÷ 12. Check the period before you start.
Including land in the SBA base, or claiming SBA on a dwelling.
The total cost of the property is used without splitting out the land.
Fix: Use only construction costs for qualifying non-residential structures. Exclude the land and any residential use. Then take 3% straight line.
Deducting disposal proceeds above original cost, or leaving the pool balance out of the carry-forward.
Students treat the pool like a gain computation.
Fix: Deduct the lower of proceeds and cost from the pool. Any excess over cost is a chargeable gain, not a capital allowance matter. If the proceeds make the pool balance negative, that is a balancing charge in any period. A balancing allowance on a pool arises only on cessation. Always show the carry-forward.

Worked examples

Example 1

Anil is a sole trader with a year ended 31 March 2026. Brought forward tax written down values are: main pool £50,000; special rate pool £30,000. In the year he bought new machinery for £700,000 (main pool), integral features for £500,000 (special rate pool) and a car with CO2 emissions of 120g/km for £25,000. He sold old machinery from the main pool for £10,000 (less than cost). Calculate the total capital allowances. Use the AIA to maximise relief.

Show the solution

Anil is an individual, so no company enhanced allowances. The period is 12 months, so the AIA limit is £1,000,000 and no time-apportionment is needed.
AIA-eligible spending: £700,000 + £500,000 = £1,200,000. The car is excluded. AIA is limited to £1,000,000.
Allocate the AIA to the special rate pool first: £500,000. The remaining £500,000 goes to main pool additions. Total AIA = £1,000,000.
Main pool: b/f £50,000 + additions not relieved £200,000 (£700,000 − £500,000) = £250,000. Deduct disposal proceeds £10,000 = £240,000. WDA at 18% = £43,200. Carry forward £196,800.
Special rate pool: b/f £30,000 + car £25,000 + unrelieved integral features £0 = £55,000. WDA at 6% = £3,300. Carry forward £51,700.
Total allowances: AIA £1,000,000 + main pool WDA £43,200 + special rate pool WDA £3,300 = £1,046,500.

Answer: Total capital allowances for the year ended 31 March 2026 are £1,046,500, made up of AIA £1,000,000, main pool WDA £43,200 and special rate pool WDA £3,300.

Example 2

Brook Ltd, a company, has a year ended 31 March 2026. Brought forward main pool is £80,000. The special rate pool brought forward is nil. In the year it bought: new unused machinery £150,000 (main pool); second-hand machinery £20,000 (main pool); new unused integral features £200,000 (special rate pool); a new car with CO2 emissions of 30g/km for £30,000. It also paid £450,000 to construct a new office building, which it first brought into qualifying use on 1 April 2025. The land cost a further £250,000. Assume the AIA has been used up elsewhere in the group. Calculate the capital allowances.

Show the solution

Brook Ltd is a company, so the tables give it a 100% first year allowance on new, unused main pool plant: £150,000.
The second-hand machinery does not qualify for the first year allowance. It goes into the main pool at £20,000.
The car has CO2 emissions of 1–50g/km. It is not a zero emission car, so the 100% car allowance does not apply. It is a car, not plant, so it gets no first year allowance. It goes into the main pool at £30,000 and earns the WDA only.
Special rate pool: 50% first year allowance on £200,000 = £100,000. The other £100,000 goes into the special rate pool.
Main pool: b/f £80,000 + second-hand £20,000 + car £30,000 = £130,000. WDA at 18% = £23,400. Carry forward £106,600.
Special rate pool: £100,000 × 6% = £6,000. Carry forward £94,000.
SBA: land is excluded. Qualifying construction cost £450,000 × 3% = £13,500 for a full year of use.
Total: first year allowances £150,000 + £100,000 = £250,000; WDAs £23,400 + £6,000 = £29,400; SBA £13,500. Total = £292,900.

Answer: Total capital allowances are £292,900: first year allowances £250,000, writing down allowances £29,400 and structures and buildings allowance £13,500.

Exam tips

Read the taxpayer first. If the question says sole trader, partner or individual, do not give company enhanced allowances. Flag this in one line to show scepticism and earn professional skills marks.
Use the tax table ACCA provides for all rates and limits. Do not rely on memory for cars or the AIA limit.
When the question asks you to advise on buying, compare timing. A purchase just before or after a year end changes the first allowance and the cash flow. Quantify the tax saved at the relevant income tax or corporation tax rate.
Show the pool layout even when the answer seems simple. Marks are awarded for each correct step, and a missed carry-forward is a typical lost mark.
For property investors, state clearly what qualifies: SBA on commercial building construction, no allowance on land, and no relief for items in dwelling houses. Then apply it to the scenario.

Practice questions from Income tax: property and investment income

Capital Allowances on Plant, Machinery 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 Applied SkillsCapital Allowances on Let Property and Structures

Capital Allowances on Plant, Machinery and Structures: frequently asked questions

What is the difference between the AIA and the company first year allowances?

The AIA gives 100% relief on up to £1,000,000 of qualifying spending a year and is open to individuals, partnerships and companies. The tables give companies a 100% first year allowance on new, unused main pool plant and 50% on special rate pool plant. Cars are excluded from the AIA, and a car gets no first year allowance unless it is a new zero emission car.

How do I calculate the writing down allowance on the main pool and special rate pool?

Take the brought forward balance, add additions not relieved by AIA or first year allowances, and deduct disposal proceeds. Multiply the result by 18% for the main pool or 6% for the special rate pool. The remainder is carried forward.

How does the structures and buildings allowance work?

It gives 3% a year on a straight line basis on the construction cost of qualifying non-residential structures and buildings. It starts when the building is first brought into qualifying use. It excludes land and is not available on dwellings.

Which assets go into the special rate pool?

Integral features, long-life assets and cars with CO2 emissions over 50 grams per kilometre go into the special rate pool, with a 6% WDA. Cars with emissions from 1 to 50 grams per kilometre go into the main pool at 18%.