UK Annual Investment Allowance Calculator

What the annual investment allowance calculator does

You enter what you spent on plant and machinery in the period, how much of it went on special-rate assets, your profit before allowances and the marginal rate at which relief is worth something to you. The tool applies the reliefs in the order the legislation does and shows the allowance claimed at each stage, the balance carried forward into later years and the tax the claim saves this period.

You cannot deduct the cost of a machine or a van from profit the way you deduct rent or wages. The tax system gives capital allowances instead, in several forms that stack in a fixed sequence. That sequence decides whether a large purchase is relieved in full this year or over a decade.

How the allowance is applied

The Annual Investment Allowance gives a full deduction for qualifying expenditure up to a cap for the accounting period, so within the cap a purchase is in effect expensed for tax. The cap belongs to the period rather than the calendar year, and businesses under common control share one cap, so a group cannot multiply it by opening extra companies.

The calculator sets the allowance against special-rate spend first and only then against main-rate spend. Special-rate assets left outside an allowance sit in a pool that unwinds at a low percentage each year. Main-rate assets unwind faster, and for companies buying new and unused equipment they may be covered by full expensing anyway. Putting the capped allowance where relief would otherwise be slowest is the standard planning approach, and it gives a larger deduction in the early years for the same spend.

Full expensing and the 50% first-year allowance

Where spend runs past the cap, companies buying new and unused assets can claim more. Full expensing gives a 100% deduction on main-rate expenditure with no upper limit. A separate first-year allowance gives half the cost of new special-rate expenditure in year one, and the other half drops into the special rate pool.

Both reliefs are limited to companies within the charge to Corporation Tax, so sole traders and partnerships cannot use them, and they cover only assets bought new and unused. Cars are excluded, and so is most equipment bought to lease out. The tick box in the advanced options turns them off; an unincorporated business or a buyer of used machinery should untick it before reading the result.

Writing-down allowances on what is left

Anything not relieved by a first-year relief joins a pool and attracts a writing-down allowance each period. The main pool has a higher rate than the special rate pool, and both rates are pro-rated for a period shorter or longer than twelve months. A pool is written down on a reducing balance, so each year takes a percentage of what remains and the unrelieved cost never quite reaches zero.

The calculator reports the writing-down allowance for the current period and the balance carried forward. Together they tell you how much of the purchase you are still waiting to relieve, which is often the more useful figure when deciding whether to bring a purchase into an earlier period.

Turning allowances into a tax saving

Allowances save tax only if there is profit to set them against. The tool caps the relief it values at the profit you entered, so a claim larger than the profit does not show as a refund. The excess is not lost: it becomes a loss to carry forward or surrender, and its value depends on rules this calculator does not model.

The marginal rate is an input because it differs between businesses. A company pays Corporation Tax, and the rate that matters is the one on the slice of profit the allowance removes, which in the marginal relief band is higher than the headline main rate. An unincorporated business sets the same allowances against income tax and Class 4 National Insurance, so its marginal rate is usually different again. Enter the rate that matches your own position.

Reading your result

The main figure is the tax saved. Below it you see the total allowances for the period, split into the Annual Investment Allowance, full expensing, the 50% first-year allowance and writing-down allowances, plus the pool balance carried forward and the share of total spend relieved this period.

A share of 100% means the whole purchase has been deducted and nothing is waiting in a pool. A lower share is cost you will relieve in later periods at the pool rate. That percentage often tells you whether a purchase is worth timing differently, or whether splitting spend across two accounting periods would use two caps instead of one.

When to use this tool

Use it before committing to a large purchase, when choosing between buying just before or just after a year end, or to sanity-check the capital allowances figure in a draft set of accounts. It also works in reverse: enter the relief you want and adjust the spend until the numbers meet.

The result is an estimate based on the figures you enter and is not tax advice. Capital allowances depend on the nature of each asset, when it was bought and how it is used, and a company with associated businesses may face further restrictions. Check the position with a qualified accountant before you file.

About This Tool: Annual Investment Allowance

Annual Investment allowance: use this tool to get an instant, accurate estimate. The figures follow official HMRC guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.