Capital Allowances for Limited Companies: AIA, Full Expensing and Which CT600 Box to Use

Capital allowances are the single most valuable — and most commonly mishandled — deduction on a company tax return. They are how you get tax relief for money spent on vans, computers, machinery, shop fit-outs, solar panels and buildings, because the depreciation in your accounts is not deductible at all.

2026 is the year the rules moved. A brand new 40% first-year allowance arrived on 1 January 2026, and the main pool writing down allowance drops from 18% to 14% on 1 April 2026 — which means most companies with a December or later year end will be using a hybrid rate this year.

This guide covers every allowance available to a UK limited company in 2026, how to work out the figures, and — the part that trips people up — exactly which CT600 box each number belongs in. Everything below reflects how WeFile handles capital allowances, including the two HMRC cross-box rules that will get a return rejected if you break them.

When your company buys equipment, the accounts spread the cost over its useful life as depreciation. HMRC ignores that entirely. Depreciation is added back in the tax computation, and a statutory deduction — the capital allowance — is given instead.

So the tax computation looks like this:

Two consequences follow. First, capital allowances never touch your statutory accounts — a claim changes your tax bill, not your reported profit. Second, if you enter depreciation but forget the allowance, you will overpay corporation tax; if you claim the allowance but forget to add back depreciation, you will underpay it and the return is wrong.

WeFile does both sides automatically: the add-back and the deduction come from the same profit and loss step, so the two can never fall out of step.

Every rate a company needs for an accounting period ending in 2026 or 2027:

The AIA gives 100% relief in the year of purchase on up to £1,000,000 of qualifying plant and machinery. That limit is permanent, and for the overwhelming majority of small companies it means every piece of equipment bought in the year is fully deductible immediately.

What qualifies

• Tools, machinery, computers, servers, tills, phones
• Vans, lorries and other commercial vehicles (a van is plant, a car is not)
• Office furniture and shop or office fit-out items
• Integral features and long-life assets — these are special rate items, but AIA can still be claimed against them
• Second-hand assets — unlike full expensing, the AIA does not require the asset to be new

What does not qualify

• Cars — never, in any circumstances
• Assets you owned personally and then brought into the company
• Assets bought in the period the trade ceases
• Land, buildings and structures (SBA territory instead)

The two traps

Short or long periods are pro-rated. A six-month accounting period has a £500,000 AIA, not £1,000,000. A period longer than 12 months has to be split into two returns anyway, and WeFile apportions the figures across both.

Groups and related companies share one AIA. Companies under common control, or in the same group, get a single £1,000,000 between them — not one each. If you file for several connected companies, allocate the limit deliberately rather than claiming it in full on each return.

Full expensing gives companies an uncapped 100% first-year deduction for new and unused main rate plant and machinery. It has been permanent since April 2023 and it is unchanged for 2026.

Because the AIA already covers the first £1,000,000, full expensing only becomes decisive when capital spending exceeds the AIA limit — or when the AIA has been allocated elsewhere in a group.

• Companies only — sole traders and partnerships cannot use it
• The asset must be new and unused — second-hand equipment is AIA territory
• Cars are excluded
• Assets bought for leasing to others are generally excluded (this is precisely the gap the new 40% FYA fills)

Announced at the Autumn Budget 2025, a 40% first-year allowance applies to expenditure incurred on or after 1 January 2026 on new and unused main rate plant and machinery that cannot qualify for full expensing.

Its purpose is to plug the two big holes in full expensing:

• Assets acquired for leasing — excluded from full expensing, but eligible for the 40% FYA
• Unincorporated businesses — sole traders and partnerships, which were never able to use full expensing at all

The exclusions are firm: cars do not qualify, and second-hand assets do not qualify. The remaining 60% of the cost goes into the main pool and attracts writing down allowances in the normal way.

For a typical trading company buying new equipment for its own use, nothing changes — full expensing at 100% is still better than 40%, and the AIA is better still for second-hand kit. The 40% FYA matters if you lease assets out, or if you are advising unincorporated clients alongside your company filings.

Anything not relieved in full in year one sits in a pool and is written down at a percentage of the balance each year, indefinitely:

• Main pool — most plant and machinery, vans, computers, and cars with CO₂ emissions of 50g/km or less
• Special rate pool — integral features (electrical systems, heating, lifts, water systems), long-life assets, thermal insulation, and cars over 50g/km

The special rate remains 6%. The main rate falls from 18% to 14% for expenditure of companies from 1 April 2026, and periods straddling that date use a hybrid rate calculated pro-rata on days.

Worked example: year ended 31 December 2026

The period has 365 days: 90 fall before 1 April 2026 and 275 fall on or after it.

On a main pool brought forward of £40,000 that is a writing down allowance of £5,995 rather than the £7,200 the old 18% rate would have given — £1,205 less relief, worth roughly £301 of corporation tax at 25%.

The small pools allowance

If the balance in your main pool or special rate pool is £1,000 or less (pro-rated for periods shorter or longer than 12 months) you can write off the whole balance instead of grinding it down at 14% or 6% for years. Use it — it closes the pool and removes a permanent piece of bookkeeping.

Cars are excluded from the AIA and from full expensing, without exception. Relief depends entirely on CO₂ emissions:

Electric vehicle charge points installed at the business premises also attract a 100% first-year allowance on the same timetable.

Two practical points. A double cab pick-up or a van is plant, not a car, so the AIA applies — but check the classification, because HMRC's treatment of double cab pick-ups has tightened. And a car used privately by a director is still a company asset: the allowance is claimed in full by the company, and the private use is dealt with through the benefit in kind, not by restricting the company's claim.

The SBA gives 3% straight line relief on qualifying expenditure on new non-residential structures and buildings — construction costs, renovations, conversions and fit-out works that are not plant. That is a 33⅓ year write-off.

• No AIA and no first-year allowance is available — 3% a year, and nothing more
• Residential property is excluded
• The cost of the land itself never qualifies
• You must hold a written allowance statement recording the qualifying amount and the date the building was first brought into use, and a buyer needs it from the seller to continue claiming
• Relief starts when the building is brought into non-residential use, and is time-apportioned in the first period

The high-value work on any building project is splitting the spend: integral features and plant come out of the building cost and into the special rate pool or main pool, where the AIA can be claimed on them at 100% rather than 3%. Doing that split properly is usually worth more than everything else in this article combined.

When you sell, scrap or otherwise dispose of an asset, the lower of the proceeds and the original cost is deducted from the relevant pool. Two things can happen:

• Balancing charge — proceeds exceed the pool balance, so the excess is added back to taxable profit. You have had more relief than the asset cost you, and HMRC claws it back.
• Balancing allowance — normally only on cessation of trade, or for a single-asset pool, giving an extra deduction for the unrelieved balance.

Balancing charges are a tax add-back only. They must never be netted against your allowances claim, and they must never touch turnover, expenses or the accounts profit — a mistake that produces accounts and a CT600 that disagree with each other.

The CT600 splits capital allowances into three separate groups of analysis boxes. Getting a figure into the right box matters: HMRC applies cross-box validation rules and will reject the submission if they are broken.

Allowances claimed — these reduce your taxable profit

Balancing charges — these increase your taxable profit

Qualifying expenditure — analysis only, no effect on the tax

These boxes record what you spent in the period, not what you are claiming. They do not change the tax — but HMRC does check them against each other.

Capital allowances live on the Profit & Loss step of the filing wizard, in their own Capital Allowances panel. Every field carries its CT600 box number on the label, so you can see exactly where a figure lands.

1. Enter depreciation as normal in your expenses. WeFile adds it back in the computation for you.
2. Allowances Claimed — enter the AIA and main pool WDA, then expand "Show 4 more allowance types" for the special rate allowance, special rate pool, structures and buildings, and other allowances. The Box 705 total (main pool including AIA) is calculated and displayed as you type.
3. Balancing Charges — open the collapsible section and enter main pool, special rate pool or other charges. These are added back in the computation automatically.
4. Qualifying Expenditure Incurred — record what you spent in the period. If you claimed the special rate allowance, box 773 is enforced here before you can proceed.
5. Previous period — if you are filing full accounts with a comparative column, enter the prior-year totals for capital allowances and balancing charges so the prior-year tax charge in your accounts is right.
6. Review the computation — the generated tax computation shows every line: depreciation added back, balancing charges added, allowances deducted, and the adjusted trading profit that drives the tax.

Filing programmatically? All fifteen fields are exposed through the WeFile developer API as flat keys — caAia, caMainPool, caSpecialRateAllowance, bcMainPool, qeSpecialRateAllowance and the rest — alongside nonTaxableIncome for the disposal-profit adjustment.

1. Claiming the AIA on a car. Cars never qualify. Check the CO₂ figure and put the car in the main pool, the special rate pool, or claim the 100% FYA if it is a new zero-emission car.
2. Filing box 693 with box 773 empty. Straight rejection with HMRC error 9609.
3. Leaving box 705 blank on an AIA-only claim. The AIA belongs in box 690 and in the box 705 total.
4. Forgetting the depreciation add-back. Claiming allowances while leaving depreciation in taxable profit understates the tax and makes the return incorrect.
5. Still using 18% for a period ending after 1 April 2026. Straddling periods need the hybrid rate — 14.99% for a year ended 31 December 2026.
6. Taxing a profit on disposal as well as the balancing charge. Use the non-taxable income adjustment so the same proceeds are not taxed twice.

Can I claim capital allowances on assets bought in an earlier year?

Yes. Allowances are not lost if they were never claimed — the unrelieved cost can be brought into the pool and written down from the current period. You cannot retrospectively claim a first-year allowance for an earlier period without amending that period's return, but the pool balance can be corrected going forward.

Do I have to claim the full amount available?

No. Capital allowances are optional and can be claimed in part. Restricting a claim is sometimes deliberate — for example to keep profits above a loss-making threshold or to preserve relief for a year at a higher effective rate. Anything not claimed stays in the pool.

My company made a loss. Are the allowances wasted?

No. Allowances increase the trading loss, which can be carried back one year, carried forward, or surrendered as group relief. See our guide to the company tax return for how losses interact with the CT600.

Are capital allowances available on a dormant company return?

No. A dormant company has no trade and no qualifying activity, so the capital allowance fields do not apply — WeFile disables them for dormant filings. See dormant company accounts explained.

What if my accounting period is longer than 12 months?

A period over 12 months must be filed as two CT600 returns, and the AIA and small pools limits are pro-rated across each. WeFile splits the period and apportions the figures automatically.

Can I claim both full expensing and the AIA in the same year?

Yes. Use the AIA where it is most valuable — including on second-hand assets and special rate items, which full expensing cannot touch — and full expensing for new main rate plant above the £1,000,000 limit.

Capital allowances are worth real money, and the difference between a claim that is correct and one that is merely plausible is usually a handful of box numbers. WeFile puts the CT600 box reference on every field, derives box 705 for you, enforces HMRC's cross-box rules before submission, and generates the tax computation and iXBRL accounts from the same figures — so the return, the computation and the accounts cannot disagree.

You can file your CT600 and your Companies House accounts together in one pass, with MTD VAT returns free of charge alongside them, and no subscription required for a single filing.

Start your filing — or, if you file for clients, see the accountant membership for 100 filings a year.