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Definition of capital allowances

In the broadest sense, capital allowances are a form of tax-approved depreciation. Depreciation, as calculated under GAAP, is not an allowable deduction in computing the chargeable profits of a trade because it is an item of a capital nature. See the Capital vs revenue expenditure guidance note. Instead, relief is given by treating the capital allowances as an expense to be deducted when arriving at the taxable trading profits. Likewise, any charges are treated as taxable receipts.

In addition to traders (self-employed individuals, partnerships or trading companies), capital allowances can also be claimed by for expenditure incurred by property businesses and certain other qualifying activities. See the Capital allowances ― general requirements guidance note.

Summary of rates ― capital allowances

The following table summarises the main capital allowances available, the rate of the allowance and if relevant any important dates or points to note, for further details including any relevant qualifying conditions or restrictions