Capital Allowances Act 2001
The reliefs that apply to commercial property, how they interact, and the court decisions that shape what we can claim. Updated for the Autumn Budget 2026 and the Supreme Court’s Orsted judgment.
Autumn Budget 2026: 28 October 2026The main rate first-year allowance rises to 50% from 1 January 2027 and the main pool writing down allowance falls to 12% from April 2027. Read our briefing.
At a glance
Position at 1 November 2026, including changes announced at the Autumn Budget on 28 October 2026.
| Relief | Rate | Who and what | Status |
|---|---|---|---|
| Annual Investment Allowance | 100% up to £1m a year | Any business. New or second-hand plant, including fixtures bought with a building. | Permanent |
| Full expensing | 100% (main rate) · 50% (special rate) | Companies only. New and unused plant. | Permanent since Nov 2023 |
| First-year allowance (new) | 40% | Companies and unincorporated businesses, including assets for leasing. New main-rate plant; not cars, second-hand or overseas leasing. | From 1 Jan 2026. Rises to 50% from 1 Jan 2027 (Budget 2026) |
| Main rate pool WDA | 14% a year | Plant not covered by AIA or FYAs. | Cut from 18% from 1 Apr 2026. Falls to 12% from 1 Apr 2027 (CT) / 6 Apr 2027 (IT) (Budget 2026) |
| Special rate pool WDA | 6% a year | Integral features, long-life assets, thermal insulation, solar panels. | Unchanged |
| Structures and Buildings Allowance | 3% a year, straight line | Construction or renovation of non-residential buildings under contracts from 29 Oct 2018. | Unchanged |
| 100% FYA: zero-emission cars and EV charge points | 100% | New and unused. | Extended to 31 Mar 2027 (CT) / 5 Apr 2027 (IT) |
| 130% super-deduction | 130% | Companies, new plant, 1 Apr 2021 – 31 Mar 2023. | Ended |
| Furnished holiday let regime | — | Allowances on FHLs as a quasi-trade. | Abolished from Apr 2025 |
The framework
The Act sets out who gets relief, for what expenditure, when and how. For property, three parts matter most. Section 11 gives allowances for expenditure on plant and machinery. Sections 21 to 23 then exclude buildings and structures, while List C in s23 preserves items such as kitchen and sanitary fittings, fire and security systems and moveable buildings.
Section 33A, added in 2008, treats electrical and lighting systems, cold water, space and water heating, air conditioning, lifts and external solar shading as integral features in the special rate pool. Section 35 excludes plant in a dwelling-house let as part of a property business.
Relief is not given in full when you spend unless an annual or first-year allowance applies. Otherwise it is spread over years through writing down allowances, which broadly take the place of depreciation in your accounts.
Government-backed incentive
The AIA gives 100% relief on qualifying plant and machinery up to £1m a year, a limit made permanent from April 2023. It is available to companies, partnerships and individuals alike.
Unlike full expensing and the new 40% FYA, the AIA is not limited to new and unused assets. That makes it the main route for fixtures acquired with a building. Groups and related businesses share a single £1m allowance.
Used well on an acquisition, the AIA turns a claim that would otherwise trickle out at 6% or 14% a year into immediate relief. See GOV.UK guidance on the AIA.
New plant
Full expensing lets companies deduct 100% of new main-rate plant and 50% of new special-rate plant in the year of spend, with no cap. Introduced from April 2023 as the successor to the 130% super-deduction, it was made permanent in November 2023. Every £1 of qualifying spend saves up to 25p of corporation tax.
It doesn’t cover second-hand assets, so it rarely applies to fixtures bought with a building, but it is powerful on new builds, fit-outs and refurbishments by companies.
From 1 January 2026, a new 40% first-year allowance applies to new main-rate plant. It reaches businesses full expensing doesn’t: unincorporated businesses such as partnerships and sole traders, and companies buying plant to lease. Cars, second-hand assets and assets leased overseas are excluded.
At the same time the main rate writing down allowance fell from 18% to 14%, from 1 April 2026 for corporation tax and 6 April 2026 for income tax. Anything left in the main pool now takes longer to relieve, which makes claiming AIA and FYAs at the right time more valuable.
Buying or selling commercial property
Commercial property solicitors are expected to make sure clients understand the capital allowance implications of a purchase or sale. Since April 2014 a buyer can only claim fixtures if the pooling requirement (the seller has claimed or pooled them) and the fixed value requirement (usually a joint s198 or s199 election made within two years) are met. Miss them and the allowances can be lost to every future owner.
Where we’re involved before heads of terms, our due diligence includes reviewing the seller’s qualifying expenditure during their ownership, checking the s198 election is correctly drafted and covers the right items, and checking the CPSE replies give the right detail and confirmations.
On a care home near Bristol bought for £420,000, the contract listed fixtures and fittings at £8,000, which only covered furniture. Our review identified £152,500 of unclaimed allowances, a tax benefit of £61,000 for a 40% taxpayer.
If the capital allowances section shows any of these, the allowances are probably at risk:
Getting it wrong can lose the allowances for every future owner and can weigh on the property’s market value.
Support for solicitorsA common misconception
The most common objection is that allowances will be clawed back as a bigger gain when the property is sold. Section 41 of the Taxation of Chargeable Gains Act 1992 says otherwise: capital allowances are not deducted from the cost of an asset when calculating a gain, so a claim cannot create or increase a chargeable gain.
Two nuances matter. Allowances can restrict a capital loss, and on a sale the s198 election decides how much of the price is treated as disposal value for the fixtures. Agreed early, that figure protects both buyer and seller.
Change in force
The furnished holiday let regime was abolished from 6 April 2025 for income tax and 1 April 2025 for corporation tax. Former FHLs are now ordinary residential lettings, and the dwelling-house restriction prevents new plant and machinery claims.
Existing pools carry on being written down with no balancing charge. Serviced accommodation run as a genuine trade, holiday parks with communal facilities and B&Bs can still qualify.
Case law
Whether an item is plant is a question of fact and law. These are the cases we apply most often, newest first.
The Supreme Court unanimously held that survey and environmental study costs for offshore windfarms were not expenditure “on” the provision of plant. The word “on” requires a close connection to the plant itself, narrower than “in connection with”. Expect closer HMRC scrutiny of professional fees, design costs and preliminaries added to plant claims.
Most of a specialist nuclear decommissioning facility was a building under s21 and s23, so it did not qualify as plant, even though it was essential to the trade. A kiln, a condenser and certain plinths did qualify. Specialist buildings are not automatically plant.
A line-by-line review of pub refurbishment costs: decorative panelling failed, but preliminaries could be apportioned to qualifying work and some alterations qualified under s25. Still the leading case on hospitality fit-outs.
Shopfronts, floor and wall finishes were part of the premises, not plant. The test is whether an item is part of the setting in which the trade is carried on or apparatus with which it is carried on.
Decor, murals and lighting installed to create a hotel’s or pub’s atmosphere were plant, because that atmosphere is part of what the business sells.
A department store’s electrical installation had to be analysed component by component. Much of this reasoning now sits in the s33A integral features rules.
Embedded allowances need a property survey, a valuation and specialist tax knowledge. Most accountancy firms claim invoiced items such as furniture and computers, but don’t have the surveying resource to identify fixtures built into the fabric of a building.
Allowances are not deducted from the cost of the asset when calculating a gain (s41 TCGA 1992), so a claim cannot create or increase a chargeable gain. They can restrict a capital loss, and on a sale the s198 election decides what passes to the buyer, so plan it into the transaction.
Every claim is documented to stand up to scrutiny, and we support you throughout any HMRC enquiry. To date every report we have submitted has been approved.
No. If we can’t identify previously unclaimed allowances, there is no fee. Full fee terms are set out in our engagement letter.
Tell us about the property and the spend. We’ll tell you what’s claimable and when.
