Writing Down Allowances — How to Claim Tax Relief on Equipment That Doesn't Qualify for AIA (2026)

What Are Writing Down Allowances?

Writing down allowances are part of the UK capital allowances system — the set of rules that let you claim tax relief on "plant and machinery" you buy for your business. Plant and machinery covers tools, vans, lorries, machines, computers, office equipment and certain fixtures in a building.

When you buy a qualifying asset, you usually claim the full cost in year one through the AIA or, for companies, full expensing. A WDA is what you claim instead when that immediate relief isn't available — it lets you deduct a fixed percentage of the asset's value from your taxable profit each year, year after year, until the cost is fully relieved.

You'll typically use writing down allowances in three situations:

• You've used up your AIA. The AIA limit is £1 million a year. Spend more than that on qualifying assets in one year and the excess gets WDAs instead of immediate relief.
• You bought a car. Cars never qualify for the AIA. They always go into a pool and attract WDAs (unless they're a new zero-emission car eligible for a first-year allowance).
• You have a balance carried forward. Assets that weren't fully relieved in earlier years sit in a pool and keep attracting WDAs each year going forward.

Quick Reference: Writing Down Allowance Rates 2026/27

The two key rates to remember are 18% for the main pool and 6% for the special rate pool. Both are calculated on a reducing-balance basis, which means the relief gets smaller every year as the pool value shrinks.

The Main Pool vs the Special Rate Pool

Capital allowances work by grouping assets into "pools" rather than tracking each item individually. Instead of depreciating your drill, your van and your bench saw separately, you add their qualifying values together into a pool and apply the WDA rate to the whole pool balance each year.

Main rate pool (18%)

This is where the vast majority of trade equipment lives. Vans, hand tools, power tools, plant, machinery, scaffolding, computers, software and most cars with lower CO₂ emissions all go into the main pool. The WDA rate is 18% of the pool balance each year.

Special rate pool (6%)

The special rate pool is for assets the government decided should get relief more slowly. The main categories that affect trades are:

• Integral features of a building you own — electrical and lighting systems, cold and hot water systems, heating, air conditioning, lifts and escalators.
• Long-life assets — plant and machinery expected to last 25 years or more.
• Thermal insulation added to an existing building.
• Cars with higher CO₂ emissions — anything above the main-pool threshold for the year of purchase.

At 6% a year, the special rate pool takes far longer to relieve than the main pool. It's worth knowing which pool an asset falls into before you buy, because it changes how quickly you get your money back through tax.

How Reducing-Balance Works — A Worked Example

"Reducing balance" is the part that confuses people most, so here's a concrete example. Say you buy a £10,000 item of plant — a van, a mini digger, a CNC machine — and for whatever reason it goes into your main pool for WDAs rather than getting the AIA (perhaps you'd already spent your full AIA that year). The 18% is applied to whatever's left in the pool, not to the original cost, so the allowance shrinks each year:

Notice that after five years you've only claimed about £6,300 of relief on the original £10,000, with £3,707 still sitting in the pool. Reducing balance never quite reaches zero — it just gets smaller and smaller. That tail is exactly why the small pools allowance exists.

The Small Pools Allowance — Clearing the Tail

Because reducing balance leaves a shrinking residue forever, there's a tidy-up rule. If the balance in your main pool or your special rate pool is £1,000 or less at the end of a tax year (before working out that year's WDA), you can claim the small pools allowance and write off the whole remaining balance in one go.

It's optional — you don't have to use it — but most people do because it clears the pool to nil and saves you tracking tiny amounts indefinitely. The £1,000 limit is proportionately adjusted if your accounting period is longer or shorter than 12 months.

Cars and the CO₂-Based Rates

Cars are the asset most trades run into WDAs with, because cars never qualify for the AIA. Which pool a car goes into — and therefore how fast you get relief — depends on its CO₂ emissions and whether it's new:

• New and unused zero-emission cars (and electric vehicles) often qualify for a 100% first-year allowance, meaning you can claim the full cost in year one — the same effect as the AIA but under a different rule.
• Cars with lower CO₂ emissions go into the main pool and attract the 18% WDA.
• Cars with higher CO₂ emissions go into the special rate pool and attract the slower 6% WDA.

The exact CO₂ thresholds for the main pool versus the special rate pool change from time to time, so check the figure that applied when you bought the car. The headline point for trade owners: a clean, low-emission car gets relief far faster than a high-emission one. A genuine commercial van, by contrast, is not a "car" for these rules and usually qualifies for the AIA in full.

Selling or Scrapping an Asset: Balancing Charges and Balancing Allowances

When you sell, scrap, give away or stop using an asset, you remove its value from the pool. You deduct the sale proceeds (or market value if you gave it away) from the pool balance. This is where balancing charges and balancing allowances come in.

Balancing charge

If selling an asset takes more out of the pool than the pool is worth — that is, the proceeds exceed the pool balance — the pool goes negative. You can't carry a negative pool, so the shortfall is added back to your taxable profit as a balancing charge. In plain terms: you claimed too much relief over the years, and now you're paying some of it back. This commonly happens if you sell a van or machine for more than its written-down value.

Balancing allowance

A balancing allowance is the opposite — extra relief you get when a pool closes with a value still left in it. In a pooled system you generally only get a balancing allowance when you close the pool entirely (for example when the business ceases), not just because you sold one asset. Single-asset pools, such as a car with private use, are the main exception where a balancing allowance can arise on disposal of that one asset.

How WDAs Fit Alongside AIA and Full Expensing

Writing down allowances aren't a separate scheme you opt into — they're the default that catches everything the faster reliefs don't. The order in which relief is given is roughly:

• First-year allowances / full expensing — for companies, full expensing gives 100% relief on most new main-pool plant and 50% on new special rate assets. Sole traders don't get full expensing but can use first-year allowances on things like new zero-emission cars.
• Annual Investment Allowance (AIA) — 100% relief on most plant and machinery up to £1 million a year, available to both sole traders and companies.
• Writing down allowances — the fallback for everything left over: the excess above the AIA, cars, and balances carried forward from earlier years.

In practice, most trade businesses relieve their tools and vans in full through the AIA and only use WDAs for cars and for the occasional big-spend year. For the full hierarchy and which assets qualify for what, see our capital allowances guide.

Sole Trader vs Limited Company Differences

The mechanics of pools, rates and balancing adjustments are the same whether you're a sole trader or a limited company — but a few things differ:

• Full expensing is companies only. A limited company paying Corporation Tax can use full expensing on new qualifying plant; a sole trader cannot. Sole traders rely on the AIA and WDAs instead.
• The tax the relief reduces is different. For a sole trader, allowances reduce Income Tax and Class 4 National Insurance on your trading profit. For a company, they reduce Corporation Tax.
• Private use only matters for sole traders. A company is a separate legal person, so an asset used privately by a director is dealt with as a benefit in kind rather than by reducing the allowance — see below.

The Private-Use Adjustment for Sole Traders

If you're a sole trader and an asset is used partly for private purposes — the classic case being a car or a van you also use at weekends — you can only claim the business-use proportion of the writing down allowance.

An asset with private use is kept in its own single-asset pool, separate from the main and special rate pools. The full WDA is calculated on that pool, but you then only deduct the business-use percentage from your profit. For example, if a car in a single-asset pool generates a £900 WDA and you use the car 70% for business, you claim £630. When you eventually sell that car, any balancing charge or balancing allowance is also restricted to the business-use proportion.

Limited companies don't make this adjustment — the company claims the full allowance, and the director's private use is taxed separately as a benefit in kind.

Practical Tips for Trade Owners

• Keep an asset register. You need to know what's in each pool, what you paid, and what you sold things for. Good records turn a balancing charge from a nasty surprise into a planned number.
• Time big purchases around your AIA. If you're going to exceed £1 million of spend in a year, the excess only gets 18% or 6% a year. Spreading purchases across accounting periods can keep more spend inside the AIA.
• Think about emissions before buying a company car. The difference between an 18% and a 6% pool — or a 100% first-year allowance on an EV — is real money over the life of the vehicle.
• Use the small pools allowance. Don't leave a £400 residue limping along at 18% a year for a decade — clear it.
• Watch for balancing charges when you sell kit. Selling a machine or van for more than its written-down value can add to your tax bill in that year.

Capital allowances are one of the few areas where getting the detail right genuinely changes your tax bill, so it's worth a conversation with your accountant before any large purchase or sale. The figures and rates here are for the 2026/27 tax year and are general guidance, not tax advice for your specific situation.