Capital allowances in AccBooks AI

What are capital allowances?

Capital allowances are the tax-deductible equivalent of depreciation. Instead of deducting your accounting depreciation charge (which is added back for tax), you claim capital allowances based on HMRC’s prescribed rates.

The main types are:

Allowance	Rate	Assets
Annual Investment Allowance (AIA)	100%	Most plant and machinery, up to £1m limit
First Year Allowance (FYA)	100%	New zero-emission vehicles, qualifying energy-saving plant
Main pool WDA	18% per year	Most plant and machinery not covered by AIA/FYA
Special rate pool WDA	6% per year	Integral features, long-life assets, thermal insulation
Structure and Buildings Allowance (SBA)	3% per year	Commercial property construction costs

Which assets qualify?

Qualifying for capital allowances (plant and machinery):

• Machinery, equipment, tools
• Computers, servers, phones
• Office furniture
• Cars (special rules apply — no AIA, rate depends on emissions)
• Fixtures and fittings in commercial property

Not qualifying:

• Land
• Residential property
• Assets used wholly for non-business purposes
• Goods held for resale (stock)

The Annual Investment Allowance (AIA)

The AIA gives 100% relief in the year of purchase for qualifying plant and machinery, up to £1 million per year (for accounting periods ending after 31 March 2023).

Example: You buy a new CNC machine for £80,000. You claim 100% AIA in year 1: £80,000 deduction, no balance carried forward to the main pool.

If your total qualifying expenditure exceeds £1 million in a year, the excess goes into the relevant pool and attracts Writing Down Allowance.

Writing Down Allowances (WDA)

Assets in the main pool (18%) and special rate pool (6%) attract WDA in subsequent years. AccBooks calculates WDA on the reducing balance basis — you claim a percentage of the pool value each year, and the remaining pool balance carries forward.

Example: Main pool opening balance £100,000. WDA at 18% = £18,000. Closing pool balance = £82,000 carries forward.

Short-life asset elections

For assets you expect to sell or scrap within 8 years, making a short-life asset election lets you create a separate pool for that asset. If you dispose of it within 8 years at less than the pool balance, you get immediate relief on the loss. Without the election, the loss just stays in the main pool indefinitely.

Make short-life asset elections in AccBooks under Fixed assets → [asset] → Tax settings → Short-life asset.

Cars

Cars don’t qualify for AIA. Instead:

• New zero-emission cars: 100% FYA.
• Low-emission cars (≤50g/km CO2): Main pool at 18% WDA.
• All other cars: Special rate pool at 6% WDA.

Enter each company car under Fixed assets → Add asset → Category: Car and select the emissions band. AccBooks assigns it to the correct pool automatically.

How AccBooks calculates capital allowances

1. All assets in the fixed asset register with a Tax pool assigned feed into the capital allowances calculation.
2. At year-end, go to Corporation tax → Capital allowances.
3. AccBooks presents the pool movements: opening balance, additions, AIA claimed, disposals, WDA claimed, closing balance.
4. Review and adjust if needed (e.g., if you want to disclaim some AIA to preserve profits for a better year).
5. The total allowances feed automatically into the CT600 computation.

Balancing allowances and charges

When you sell or dispose of an asset, AccBooks compares the disposal proceeds to the pool balance:

• If proceeds < pool balance: balancing allowance (extra deduction).
• If proceeds > pool balance: balancing charge (tax payable on the excess).

For the main pool, balancing allowances only arise when the pool is closed (all assets sold). For individual pools (short-life assets, cars), they arise on each disposal.