A guide to capital allowances in the UK

Plant and machinery allowances

Plant and machinery (P&M) allowances are available for spend on business equipment, including many ordinary ‘fixtures’ in commercial property and the common parts of multi-let residential properties. Fixtures are assets that become part of the property in law.

In a real estate setting, P&M assets are divided into two main categories:

1. Special rate P&M: includes “integral features” (i.e. electrical power and lighting; hot and cold water; heating, ventilation and cooling; lifts and escalators; and external solar shading), adding insulation to existing buildings to retain heat, solar panels, and “long-life assets” (i.e., P&M with a useful economic life of at least 25 years), and
2. Main pool assets: are all other P&M that is not special rate. 

P&M allowances are available at several rates depending on the type of P&M and when the money was spent:

• 130% super-deduction: This is a first-year allowance that applies to spend on new P&M after 1 April 2021 and before 1 April 2023 and gives a 130% tax deduction (i.e. 30% more than the actual spend). However, contracts to buy the assets must be entered into after 3 March 2021.
• 100% full expensing: The Chancellor announced in the 2023 Spring Budget ‘full expensing’ for companies investing in new items of P&M qualifying for the main pool. Expenditure must be incurred after 1 April 2023.
• 100% annual investment allowance: The annual investment allowance (AIA) is available to immediately shelter up to £1,000,000 of qualifying spend on P&M each year. This potentially accelerates a substantial proportion of the tax relief. In the Spring Budget 2023, the AIA was permanently set at £1,000,000 for qualifying expenditure on P&M incurred from 1 April 2023.
• 50% SR allowance: Applies to investment by companies on new P&M after 1 April 2023 and gives a 50% first-year allowance for investment in special rate P&M assets. The contracts must be entered into after 3 March 2021. 
• 18% writing-down allowance: For items classified as main pool P&M, the default rate if none of the rates above apply is 18% a year on a reducing-balance basis.
• 6% writing-down allowance: For items classified as special rate pool P&M, the default rate if none of the rates above apply is 6% a year on a reducing-balance basis.

3% structures and buildings allowances

Structures and buildings allowances (SBAs) are available at a flat-rate 3% for spend on structures and buildings that do not qualify for P&M allowances or land remediation relief. They are not given for residential property.

150% land remediation relief

This is given to companies that clean up contaminated land and buildings or bring long-term derelict land back into economic use. It is a 150% relief from corporation tax and is available to developers, investors and occupiers, and for both commercial and residential property.