AIA vs full expensing vs writing-down allowances: which should a small company claim?

In short: Full expensing and AIA can each deduct a qualifying new van in full, but AIA is capped at £1 million. The main-pool writing-down rate is 14% from April 2026 (GOV.UK: rates and pools). Taxley files a limited company's Company Tax Return for £39.95 with micro-entity accounts, including Companies House filing once the return is paid and the accounts are finished.

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Key facts (checked on 21 October 2026)

What is the difference between the annual investment allowance, full expensing and a writing-down allowance?

The annual investment allowance deducts up to £1 million of most plant in the year of purchase. Full expensing deducts all of a company's qualifying new main-rate plant, if it is unused and not a car. A writing-down allowance deducts 14% of the main pool, or 6% of the special-rate pool, each year from April 2026 for Corporation Tax.

The annual investment allowance and full expensing can be used in the same period, but not both on the same cost. The allowance is £1 million for 12 months, and companies controlled by the same person share one allowance. A nine-month period gives 9/12 × £1,000,000 = £750,000. The final period gets none. New special-rate plant can take 50% this year, with the other half pooled in the following period and no writing-down allowance on that half yet. That spend can take the annual investment allowance instead. Where profits are low, only part of the cost needs to be claimed as that allowance (GOV.UK: annual investment allowance; GOV.UK: check full expensing).

From 1 April 2026 the Corporation Tax main-pool rate is 14%, and it was 18% before that date. The special-rate pool stays at 6%. A period that includes 1 April 2026 weights 18% and 14% by the days and rounds up to two decimal places. HMRC's example for 1 January 2026 to 31 December 2026 is 14.99%. A 40% first-year allowance covers new and unused main-rate plant bought on or after 1 January 2026, other than a car. The other 60% is pooled only in a later period. Full expensing's immediate balancing charge does not apply to the 40% allowance. On the company's own new van, 40% is a smaller year-one deduction (GOV.UK: hybrid rate; HMRC manual CA23195F).

Which assets qualify for the annual investment allowance, full expensing and writing-down allowances?

A van, lorry or motorcycle is not a car, so the annual investment allowance can apply, and full expensing can apply if it is new, unused and not hired out. Second-hand machinery can take the allowance but not full expensing. A car takes neither: over 50g/km it takes 6% a year, and 50g/km or less takes the main rate.

The annual investment allowance covers most plant up to £1 million. It excludes cars, gifts and items already owned for another reason. Second-hand plant bought for the business is not excluded. Full expensing and the 50% allowance are for companies only, on new and unused assets from 1 April 2023. They also exclude a gift, plant bought to lease except background plant in a building, and a purchase in the cessation period. Integral features, solar panels, thermal insulation and long-life items are special rate. Long-life plant lasts at least 25 years from new and uses that pool above £100,000 in the period (GOV.UK: business cars; GOV.UK: first-year allowances).

What tax is due when the company later sells the asset?

Where full expensing covered the whole cost, the balancing charge equals the disposal value and is not taken off the pool. Where the annual investment allowance or a writing-down allowance was used, the disposal value comes off any pool balance first, and only the excess is a balancing charge.

Sell the van later for £24,000, below its £60,000 cost, with £30,000 brought forward in the main pool and nothing else added or sold. Full expensing on the whole van makes the balancing charge £24,000, and that amount stays out of the pool. At 19% the charge is £4,560 and at 25% it is £6,000, if the profit sits wholly in that rate. The pool is still £30,000, so 14% of it is £4,200. The annual investment allowance route deducts £24,000 from £30,000, leaving £6,000 and no charge, and 14% of £6,000 is £840. A nil main pool makes the £24,000 a balancing charge under both routes. See the balancing charges guide (GOV.UK: sell an asset; GOV.UK: full expensing disposal).

What can a company claim on a £60,000 van, £20,000 of second-hand machinery and a £15,000 car?

For the year ended 31 March 2027, the largest year-one claim on these three assets is £80,900. Full expensing of £60,000 on the new van, the annual investment allowance of £20,000 on the machinery, and £900 on the car reach it. The allowance on the van and the machinery, plus £900, is also £80,900.

The year from 1 April 2026 to 31 March 2027 sits wholly in Corporation Tax financial year 2026, so the main-pool rate is 14% with no hybrid. Each asset is bought and brought into use on 1 May 2026, used in the trade and not hired out. Amounts are after recoverable VAT, an assumption of this example. The van is new and unused. The machinery is second-hand, so full expensing and the 40% allowance do not apply. The car emits over 50g/km, so £15,000 × 6% = £900 and £14,100 carries forward. This is not the final period, nothing else uses the annual investment allowance, and it is not shared. Depreciation is added back. The equipment guide separates that charge from these allowances (HMRC toolkit: capital v revenue).

Writing-down allowances only pool the van with the machinery: £80,000 × 14% = £11,200, plus £900, so £12,100. The main pool carried forward is £68,800 and the special-rate pool is £14,100. A 40% claim on the van is £24,000 now. The other £36,000 is not pooled until a later period. If the £20,000 were new integral features, the choices are £20,000 of annual investment allowance, 50% which is £10,000 with £10,000 pooled next period, or 6% which is £1,200. For 12 months with no associated companies, and only where profit after other reliefs sits wholly in one rate, £80,900 saves £15,371 at 19% and £20,225 at 25%. A claim of £12,100 saves £2,299 at 19% and £3,025 at 25%. The gap is £13,072 at 19% and £17,200 at 25%. Between £50,000 and £250,000, use marginal relief (Corporation Tax rates guide; GOV.UK: Corporation Tax rates).

When does each allowance tend to suit a small company?

Full expensing and the annual investment allowance match on a new van under £1 million. The allowance covers second-hand plant. Writing-down allowances spread the cost, which can suit low profits. A later sale can cost more where full expensing was used and the pool still has a balance.

Two routes that both deduct £80,900 in year one can diverge when the van is sold. Writing-down allowances leave more cost for later years and can keep a small profit from becoming a loss. A 100% claim brings relief forward and can bring more of a later sale into a balancing charge, if the pool is empty or full expensing covered the whole cost. Hiring plant out is outside full expensing and the 50% allowance. A short period, companies controlled by the same person, or cessation changes the annual investment allowance first. Take advice before filing where the figures are not straightforward (GOV.UK: full expensing).

What happens if the allowances create a trading loss?

Capital allowances increase a trading loss, and a balancing charge reduces one. The annual investment allowance need not cover the whole cost, so the claim can stop short of a loss. An unused trading loss can go against same-period profits, back against the earlier 12 months of the same trade, or forward.

A tax-adjusted trading profit of £50,000 before allowances, for the year to 31 March 2027 with no associated companies, becomes a trading loss of £30,900 if £80,900 of allowances is claimed. Carry that loss back against earlier profits of the same trade of at least £30,900 and the tax effect is £5,871 at 19% or £7,725 at 25%, where those profits sat wholly in that rate. Those amounts illustrate the rate. They are not a repayment. Writing-down allowances of £12,100 leave a profit of £37,900, and tax at 19% is £7,201. A carry-back claim is due within two years of the end of the loss period. From 1 April 2017, carried-forward losses are broadly limited to £5 million plus 50% of the remaining profits. The trading loss guide covers the return. Where this is not straightforward, take advice (GOV.UK: trading losses).

How does Taxley deal with these allowances on a Company Tax Return?

Taxley can put the annual investment allowance, full expensing, the 50% special-rate allowance, the 40% first-year allowance and writing-down allowances on a limited company's Company Tax Return. The capital allowances step works them out from the assets entered, and the same figures can be typed into the allowance boxes when the company has already done the sums.

Taxley (taxley.co.uk), UK online software that prepares and files the Company Tax Return (CT600) with HMRC and the annual accounts with Companies House, uses the cost, whether the asset was new and, for a car, its CO2. A van is entered as a vehicle. New unused main-rate plant used in the trade can take full expensing, new special-rate plant the 50% allowance, and qualifying plant the annual investment allowance. The 40% allowance can replace full expensing. A new unused zero-emission car can take 100% when the date qualifies. Other cars follow the main pool or the special-rate pool. Annual investment allowance and full expensing can be typed in. With micro-entity accounts the fee is £39.95. Taxley files the accounts at Companies House once the return is paid and the accounts are finished. It does not file Self Assessment, VAT returns or payroll, and it does not prepare a partnership or LLP return. It does not apply full expensing or the 50% allowance to a property business or to plant hired out. Freeports, the VAT capital goods scheme and other leasing need a typed figure. Take the 30-second check to see whether Taxley fits your company.

Frequently asked questions

Can a sole trader or a partnership claim full expensing?

No. Full expensing and the 50% allowance are for companies only. A sole trader, or a partnership whose members are all individuals, can claim the annual investment allowance and writing-down allowances. A partnership that includes a company cannot claim that allowance (GOV.UK: full expensing).

Can the annual investment allowance be used on second-hand machinery?

Yes, if it is plant bought for the business and the other conditions are met. Cars, gifts and items already owned for another reason are excluded. Full expensing, not this allowance, requires the asset to be new and unused (GOV.UK: annual investment allowance).

Does 14% apply when the accounting period straddles 1 April 2026?

Not as a flat 14%. Days before 1 April 2026 use 18% and later days use 14%, rounded up to two decimal places. HMRC's example for 1 January 2026 to 31 December 2026 is 14.99% (GOV.UK: hybrid rate).

Can both allowances be claimed on the same expenditure?

No. Both can be claimed in one period, but not on the same cost. Spend above the £1 million cap can take a first-year allowance or a writing-down allowance on the excess (GOV.UK: full expensing).

Do company cars qualify for the annual investment allowance or full expensing?

No. Cars are outside both, and outside the 40% allowance. From April 2021, over 50g/km takes 6% and up to 50g/km takes the main rate. A new unused zero-emission car bought before April 2027 can take 100% (GOV.UK: business cars).

What does the 50% first-year allowance cover?

New and unused special-rate plant bought by a company on or after 1 April 2023, such as integral features, and not a car. Half the cost is deducted in the purchase year. The other half joins the special-rate pool in the following period (GOV.UK: check full expensing).

General information, not personalised tax or accounting advice. Rates and rules checked on 21 October 2026.