Plant and machinery allowances

Three types of allowance are available for expenditure on plant and machinery:

  • annual investment allowance (AIA), which provides a 100% allowance for the first £200,000 of expenditure per year
  • first year allowances (FYAs) which also provide a 100% allowance for expenditure, but restricted to particular types of plant or machinery, and
  • writing down allowances, which provide a percentage allowance of 18% or 8% per year

In addition, balancing allowances and balancing charges may arise in some circumstances where assets are disposed of or the business ceases.

To compute writing down allowances, balancing allowances and balancing charges, expenditure is 'pooled'. Most types of assets are pooled in the 'general pool', but those qualifying for writing down allowances at only 8% are pooled in a separate 'special rate pool'. Expenditure on some types of assets is not added to the general pool or the special rate pool; instead each asset has its own 'single asset pool'. This applies where a short life asset election is made and where assets are used by unincorporated businesses both for business and privately. See the Capital allowances for sole traders and partnerships guidance note.

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