Writing Down Allowance & Capital Allowances Guide

If you've bought a van, machinery or equipment for your business, you can usually claim tax relief on it. The writing down allowance (WDA) is one of the main ways you do that, and the main-pool rate is changing from April 2026.

This guide explains what the writing down allowance is, the rates for 2025/26, the rate change coming in 2026, and how to calculate your claim. We've kept the worked examples simple and labelled them clearly, so you can follow the maths and apply it to your own numbers.

It's written for limited companies and the self-employed who invest in long-term business assets. The rules below apply to England, Wales and Northern Ireland; the figures relate to the 2025/26 tax year unless stated.

What are capital allowances?

Capital allowances are a type of tax relief you can claim when you buy long-term assets for your business. These are items you can reasonably expect to use for longer than 12 months, sometimes called fixed assets or capital assets.

When you claim a capital allowance, you deduct part or all of the asset's cost from your taxable profits. Lower taxable profit means a lower tax bill. For a company, that's less Corporation Tax; for the self-employed, it reduces the profit you pay Income Tax on.

There's a reason capital allowances exist rather than just letting you expense the asset. Long-term assets lose value through wear and tear, and the rules spread (or accelerate) the relief in a way that's meant to encourage investment.

It helps to separate capital allowances from everyday running costs. The cost of a van is a capital allowance; the van's insurance, which lasts about a year, is an allowable expense you deduct straight away.

What is the writing down allowance?

The writing down allowance is a specific type of capital allowance that gives you relief on an asset's value over several years, rather than all at once.

The asset's value "writes down" each year. You claim a percentage of its remaining tax value (the "written down value"), then carry the reduced figure forward to the next year. Over time the relief tails off as the value shrinks.

Most assets that go through WDA sit in one of two pools, and the rate depends on which pool:

Both rates apply to the written down value, not the original cost. These are the rates for 2025/26 published by gov.uk. The main-pool rate changes from April 2026, which we cover next.

Illustrative example: main-pool WDA at 18%

You buy machinery for £50,000 in the 2025/26 tax year and put it in the main pool at 18% (assume you've already used your Annual Investment Allowance elsewhere).

• Year 1: £50,000 x 18% = £9,000 allowance. Written down value falls to £41,000.
• Year 2: £41,000 x 18% = £7,380 allowance. Written down value falls to £33,620.

You claim the rate against the remaining value each year for as long as you own the asset.

What capital allowances changes are coming in 2026?

The headline change is the main-pool writing down allowance rate. As announced at Budget 2025, the main rate pool WDA reduces from 18% to 14% from April 2026. The special rate pool stays at 6%.

In practice that means slightly less annual relief on main-pool assets that you're writing down over time. It does not change the Annual Investment Allowance, which stays at £1 million.

If you're planning a large purchase that won't be fully covered by the Annual Investment Allowance, the timing matters: an asset in the main pool earns 18% in 2025/26 versus 14% once the new rate takes effect. We'd weigh that against cash flow and your wider tax position before deciding, and it's worth talking to an accountant first.

Is writing down allowance the same as depreciation?

No. They look similar but do different jobs.

Depreciation is an accounting figure. It spreads an asset's cost across its useful life in your financial accounts, using rates and methods you choose under accounting standards. It shows up in your profit and loss account.

Writing down allowance is a tax figure. HMRC sets the rates (18% or 6% for 2025/26, with the main rate moving to 14% from April 2026), and you use it in your tax computation, not your accounts.

Because the two use different rates, your accounts might show, say, £10,000 of depreciation while your tax computation claims a different WDA figure. For tax, you add the depreciation back and claim capital allowances instead. That's normal and expected.

What assets qualify for capital allowances?

Not everything you buy qualifies. Knowing the difference helps you plan.

Assets that typically qualify (often called plant and machinery) include:

• Vans, lorries and other commercial vehicles, and cars (under separate rules, see below)
• Machinery and manufacturing equipment
• Computers, laptops and tablets
• Office equipment such as desks, photocopiers and shelving
• Tools and fixtures
• The cost of altering a building to install qualifying equipment

You can usually only claim on assets you own and use in the business. The asset has to be bought for business purposes. Items you keep as stock for resale are dealt with as trading stock, not capital allowances.

You can't claim plant and machinery allowances on:

• Land
• Most buildings and structures, including doors, gates, bridges and roads (a separate Structures and Buildings Allowance may apply)
• Things bought only for business entertainment (HMRC's own examples include a yacht or a karaoke machine)
• Assets you lease rather than own

Leased assets don't qualify because you don't own them. The lease payments are normally an allowable expense instead, and the leasing company claims the allowances as owner.

Which types of capital allowances can you claim?

There's more than one allowance, and the order you claim them in matters.

Annual Investment Allowance (AIA)

The Annual Investment Allowance gives 100% tax relief on qualifying plant and machinery, up to £1 million a year. It's usually the first thing to claim, because you get the full deduction immediately. The £1 million limit is the current permanent level.

Illustrative example: AIA

You buy equipment for £80,000 in 2025/26 and claim AIA. You deduct the full £80,000 from your profits. If you're a company paying the small profits rate of Corporation Tax (19% on profits up to £50,000 for FY2025), that's a saving of £80,000 x 19% = £15,200.

Full expensing (companies)

Companies can claim full expensing, a 100% first-year allowance on qualifying new main-rate plant and machinery, with no upper limit. It's been available since 1 April 2023 and is permanent. It sits alongside the AIA, and it's useful for companies whose spend exceeds the AIA limit.

Writing down allowances

If you don't use AIA or full expensing (for example because the limit is used up, or the asset doesn't qualify), the asset goes into a pool and you claim WDA: 18% a year on the main pool (14% from April 2026) and 6% on the special rate pool.

First-year allowances for low-emission assets

A 100% first-year allowance applies to certain assets, including new and unused zero-emission cars and zero-emission goods vehicles. The rules and end dates for these reliefs change over time, so check the current gov.uk guidance before relying on a specific date.

Structures and Buildings Allowance (SBA)

For qualifying construction or renovation of commercial buildings and structures, you can claim the Structures and Buildings Allowance at 3% a year over 33⅓ years. It's a separate regime from plant and machinery, with its own rules.

How do you calculate writing down allowance?

The method is the same every year, you just track the value as it falls.

1. Start with the written down value. For a brand-new asset that's the cost; in later years it's the value after previous allowances.
2. Apply the rate. 18% for the main pool (14% from April 2026) or 6% for the special rate pool.
3. Calculate the allowance. Multiply the written down value by the rate.
4. Carry forward the new value. Subtract the allowance from the written down value.

Illustrative example: WDA across the rate change

You put office equipment costing £30,000 into the main pool in the 2025/26 tax year (AIA already used). You're a company paying Corporation Tax at the 19% small profits rate.

• 2025/26 (18%): £30,000 x 18% = £5,400 allowance. Tax saving £5,400 x 19% = £1,026. Value carried forward: £24,600.
• 2026/27 (14%): £24,600 x 14% = £3,444 allowance. Tax saving £3,444 x 19% = £654.36. Value carried forward: £21,156.
• 2027/28 (14%): £21,156 x 14% = £2,961.84 allowance. Tax saving £2,961.84 x 19% = £562.75. Value carried forward: £18,194.16.

The pattern repeats each year while you own the asset. In practice the main pool combines all your main-pool assets, so you don't usually track each item separately. Accounting software handles the running totals for you.

What are the rules for cars and capital allowances?

Cars follow their own rules, based on CO2 emissions rather than the standard pooling you'd use for a van.

HMRC treats a vehicle as a "car" if it's suitable for private use and most people would use it privately, and it wasn't built mainly for transporting goods. Motorcycles, lorries, vans and trucks are not cars for this purpose.

The allowance depends on emissions:

Illustrative example: zero-emission car

You buy a new, unused fully electric car (0g/km) for £40,000. With the 100% first-year allowance you claim the full £40,000 in year one. For a company on the 19% small profits rate, that's a saving of £7,600 in the year of purchase. That's why low-emission vehicles can be efficient choices.

Vans are treated more generously than cars: they're not subject to the CO2 thresholds and usually qualify for AIA (100% relief up to £1 million), or main-pool WDA if AIA isn't available. This often makes a van more tax-efficient than a higher-emission car.

Double-cab pickups from April 2025

There's an important change for double-cab pickups (DCPUs). For expenditure on or after 1 April 2025 (Corporation Tax) and 6 April 2025 (Income Tax), HMRC no longer treats most one-tonne-or-more double-cab pickups as vans for capital allowances. They're generally treated as cars instead, so the CO2-based rules above apply and they can't get AIA.

Transitional rules apply where the vehicle was bought under a contract entered into before that date and the spend falls before 1 October 2025. If you're in the construction or trades sector and rely on pickups, it's worth checking how your next purchase will be treated.

What happens when you dispose of an asset?

When an asset leaves the business, that's a "disposal" for capital allowances. It happens when you sell it, scrap it, give it away, or start using it wholly outside the business.

You compare the disposal proceeds (what you got, or market value if you gave it away) against the asset's written down value.

• Balancing allowance: if proceeds are below the written down value, you get extra relief. Example: written down value £15,000, sold for £8,000, so a £7,000 balancing allowance reduces your taxable profit.
• Balancing charge: if proceeds are above the written down value, the difference is added back to your taxable profit. Example: written down value £12,000, sold for £18,000, so a £6,000 balancing charge increases your taxable profit.

In a pool, a disposal usually just reduces the pool value rather than triggering an immediate balancing figure, with balancing adjustments arising in specific situations. The point is the system claws back or tops up relief so you end up with the right total over the asset's life.

How do you claim capital allowances?

Claiming is more straightforward than the calculations behind it.

A company claims through its Corporation Tax return (CT600), entering opening pool values, additions, disposals, allowances claimed and closing values. The self-employed claim through the Self Assessment return.

Keep records that support the claim: purchase invoices and dates, asset descriptions and costs, which pool each asset sits in, allowances claimed each year, written down values carried forward, and disposal proceeds. HMRC can ask to see these.

You're responsible for claiming the right allowances at the right rates and keeping accurate records. Underclaiming means paying more tax than you need to; overclaiming can lead to penalties. With the main-pool rate changing in April 2026, getting the timing and rate right is worth a second pair of eyes.

How can Zmartly help?

Capital allowances are one of the fiddlier corners of UK tax, and the April 2026 rate change adds another thing to get right. We help limited companies and the self-employed claim everything they're entitled to while staying compliant.

We can review your past claims for missed relief, work out the most efficient mix of AIA, full expensing and WDA for a planned purchase, advise on timing around the 2026 main-pool change, and prepare the capital allowances pages of your Corporation Tax return. If you run a fleet or rely on pickups, we'll help you navigate the vehicle and double-cab rules before you buy, not after.

Illustrative example: planning a large purchase

A company plans to buy £200,000 of production equipment. If its Annual Investment Allowance is available, claiming AIA gives 100% relief and £200,000 x 19% = £38,000 of tax saving in that year, whichever side of April 2026 the purchase falls. The timing question only really bites if the AIA is already used up and the spend would otherwise go into the main pool, where 18% relief (2025/26) is more generous than 14% (from April 2026). We'd model both before recommending a date.

Want help getting your capital allowances right? Book a free call with a Zmartly accountant and we'll review your assets and your next purchase. We also support limited companies end to end, from bookkeeping to statutory accounts.

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