---
title: "Capital allowances: deducting assets from taxable profit"
description: "Capital allowances: deducting assets from taxable profit"
---
[Skip to content](https://help.1stformations.co.uk/accounting-service/capital-allowances-deducting-assets-from-taxable-profit#main-content)
[](https://www.1stformations.co.uk/)
- [Help Centre](https://help.1stformations.co.uk/)
Open main navigation
Close main navigation
- [Help Centre](https://help.1stformations.co.uk/)
- [Login](https://www.1stformations.co.uk/login/)
[Login](https://www.1stformations.co.uk/login/)
How can we help you?
- There are no suggestions because the search field is empty.
1. [Accounting Service](https://help.1stformations.co.uk/accounting-service?hsLang=en-gb)
2. [Corporation Tax and Year-End](https://help.1stformations.co.uk/accounting-service/corporation-tax-and-year-end?hsLang=en-gb)
3. [Corporation Tax Fundamentals](https://help.1stformations.co.uk/accounting-service/corporation-tax-and-year-end?hsLang=en-gb#corporation-tax-fundamentals)
# Capital allowances: deducting assets from taxable profit
## The Annual Investment Allowance and electric vehicles - explained
You cannot deduct the cost of capital assets (equipment, computers, furniture) as a direct expense. Instead, you claim capital allowances, which spread the deduction over time or, in some cases, allow an immediate 100% write-off.
### The Annual Investment Allowance (AIA)
The AIA allows a 100% deduction in the year of purchase for most plant and machinery up to £1 million. Buying qualifying equipment before your year-end claims the full deduction in the current year; buying one day after the year-end defers it by a full year. Note that cars do not qualify for the AIA, they have their own rules below.
### Electric vehicles
New electric company cars qualify for a 100% first year allowance, so the full cost is deductible in the year of purchase. This relief is currently available until 31 March 2027. Petrol and diesel cars instead receive much smaller annual deductions on a reducing-balance basis: 14% a year for cars up to 50g/km CO2, or 6% a year for higher-emission cars. An electric car is therefore significantly more tax-efficient as a company vehicle.
💡 **Good to know:** Tell us before purchasing any significant asset so we can confirm the correct allowance treatment. Some assets (short lease equipment, cars) have different rules from standard plant and machinery.
### Not found what you're looking for?
Please get in touch and we'll be happy to help:
**Email:** You can submit a request using our [contact form](https://forms.1stformations.co.uk/contact/)
**Phone:** 020 3897 2233
**Live Chat:** Select the live chat icon on the bottom right
- [Your Plan](https://help.1stformations.co.uk/accounting-service/your-plan?hsLang=en-gb#main-content)
- [Understanding Your Plan](https://help.1stformations.co.uk/accounting-service/your-plan?hsLang=en-gb#understanding-your-plan)
- [Compliance Included in Your Plan](https://help.1stformations.co.uk/accounting-service/your-plan?hsLang=en-gb#compliance-included-in-your-plan)
- [Your Xero Plan](https://help.1stformations.co.uk/accounting-service/your-plan?hsLang=en-gb#your-xero-plan)
- [Add-ons Explained](https://help.1stformations.co.uk/accounting-service/your-plan?hsLang=en-gb#add-ons-explained)
- [Working with Us](https://help.1stformations.co.uk/accounting-service/working-with-us?hsLang=en-gb#main-content)
- [How to Contact Us](https://help.1stformations.co.uk/accounting-service/working-with-us?hsLang=en-gb#how-to-contact-us)
- [Your Accountant and Support Team](https://help.1stformations.co.uk/accounting-service/working-with-us?hsLang=en-gb#your-accountant-and-support-team)
- [Keeping Your Details Up to Date](https://help.1stformations.co.uk/accounting-service/working-with-us?hsLang=en-gb#keeping-your-details-up-to-date)
- [New Company Essentials](https://help.1stformations.co.uk/accounting-service/new-company-essentials?hsLang=en-gb#main-content)
- [Getting Started](https://help.1stformations.co.uk/accounting-service/new-company-essentials?hsLang=en-gb#getting-started)
- [Before and Beyond Trading](https://help.1stformations.co.uk/accounting-service/new-company-essentials?hsLang=en-gb#before-and-beyond-trading)
- [What You Can and Can't Claim](https://help.1stformations.co.uk/accounting-service/what-you-can-and-cant-claim?hsLang=en-gb#main-content)
- [Benefits, Perks, and Grey Areas](https://help.1stformations.co.uk/accounting-service/what-you-can-and-cant-claim?hsLang=en-gb#benefits-perks-and-grey-areas)
- [Mileage, Travel and Subsistence](https://help.1stformations.co.uk/accounting-service/what-you-can-and-cant-claim?hsLang=en-gb#mileage-travel-and-subsistence)
- [Xero Training and Analytics](https://help.1stformations.co.uk/accounting-service/xero-training-and-analytics?hsLang=en-gb#main-content)
- [Weekly Xero Training Sessions](https://help.1stformations.co.uk/accounting-service/xero-training-and-analytics?hsLang=en-gb#weekly-xero-training-sessions)
- [Xero Health Checks](https://help.1stformations.co.uk/accounting-service/xero-training-and-analytics?hsLang=en-gb#xero-health-checks)
- [Syft Analytics](https://help.1stformations.co.uk/accounting-service/xero-training-and-analytics?hsLang=en-gb#syft-analytics)
- [Tax Reviews and Webinars](https://help.1stformations.co.uk/accounting-service/tax-reviews-and-webinars?hsLang=en-gb#main-content)
- [Annual Tax Efficiency Review](https://help.1stformations.co.uk/accounting-service/tax-reviews-and-webinars?hsLang=en-gb#annual-tax-efficiency-review)
- [Quarterly Business Performance Review](https://help.1stformations.co.uk/accounting-service/tax-reviews-and-webinars?hsLang=en-gb#quarterly-business-performance-review)
- [Topical Webinars](https://help.1stformations.co.uk/accounting-service/tax-reviews-and-webinars?hsLang=en-gb#topical-webinars)
- [Bookkeeping Basics](https://help.1stformations.co.uk/accounting-service/bookkeeping-basics?hsLang=en-gb#main-content)
- [Day-to-Day Bookkeeping Workflow](https://help.1stformations.co.uk/accounting-service/bookkeeping-basics?hsLang=en-gb#day-to-day-bookkeeping-workflow)
- [Bank Reconciliation](https://help.1stformations.co.uk/accounting-service/bookkeeping-basics?hsLang=en-gb#bank-reconciliation)
- [Recording Sales and Purchases](https://help.1stformations.co.uk/accounting-service/bookkeeping-basics?hsLang=en-gb#recording-sales-and-purchases)
- [Managing Receipts and Best Practice](https://help.1stformations.co.uk/accounting-service/bookkeeping-basics?hsLang=en-gb#managing-receipts-and-best-practice)
- [VAT Registration and Submissions](https://help.1stformations.co.uk/accounting-service/vat-registration-and-submissions?hsLang=en-gb#main-content)
- [Do I Need to Register for VAT](https://help.1stformations.co.uk/accounting-service/vat-registration-and-submissions?hsLang=en-gb#do-i-need-to-register-for-vat)
- [Submitting VAT Returns](https://help.1stformations.co.uk/accounting-service/vat-registration-and-submissions?hsLang=en-gb#submitting-vat-returns)
- [VAT on Sales and Purchases](https://help.1stformations.co.uk/accounting-service/vat-registration-and-submissions?hsLang=en-gb#vat-on-sales-and-purchases)
- [VAT Payments and Schemes](https://help.1stformations.co.uk/accounting-service/vat-registration-and-submissions?hsLang=en-gb#vat-payments-and-schemes)
- [Paying Yourself and Employees](https://help.1stformations.co.uk/accounting-service/paying-yourself-and-employees?hsLang=en-gb#main-content)
- [Paying Directors: Salary vs Dividends](https://help.1stformations.co.uk/accounting-service/paying-yourself-and-employees?hsLang=en-gb#paying-directors-salary-vs-dividends)
- [Your Payslip and National Insurance](https://help.1stformations.co.uk/accounting-service/paying-yourself-and-employees?hsLang=en-gb#your-payslip-and-national-insurance)
- [Dividends: Legal Process](https://help.1stformations.co.uk/accounting-service/paying-yourself-and-employees?hsLang=en-gb#dividends-legal-process)
- [Payroll Essentials for New Directors](https://help.1stformations.co.uk/accounting-service/paying-yourself-and-employees?hsLang=en-gb#payroll-essentials-for-new-directors)
- [Hiring and Employment Status](https://help.1stformations.co.uk/accounting-service/paying-yourself-and-employees?hsLang=en-gb#hiring-and-employment-status)
- [Corporation Tax and Year-End](https://help.1stformations.co.uk/accounting-service/corporation-tax-and-year-end?hsLang=en-gb#main-content)
- [Corporation Tax Fundamentals](https://help.1stformations.co.uk/accounting-service/corporation-tax-and-year-end?hsLang=en-gb#corporation-tax-fundamentals)
- [Allowable Expenses and Year-End Planning](https://help.1stformations.co.uk/accounting-service/corporation-tax-and-year-end?hsLang=en-gb#allowable-expenses-and-year-end-planning)
- [PAYE and Payroll Basics](https://help.1stformations.co.uk/accounting-service/corporation-tax-and-year-end?hsLang=en-gb#paye-and-payroll-basics)
- [Director's Loan and HMRC Communications](https://help.1stformations.co.uk/accounting-service/corporation-tax-and-year-end?hsLang=en-gb#directors-loan-and-hmrc-communications)
- [Losses, Rates and Reliefs](https://help.1stformations.co.uk/accounting-service/corporation-tax-and-year-end?hsLang=en-gb#losses-rates-and-reliefs)
- [Invoices & Payments](https://help.1stformations.co.uk/accounting-service/invoices-payments?hsLang=en-gb#main-content)
- [Creating Invoices and Getting Paid](https://help.1stformations.co.uk/accounting-service/invoices-payments?hsLang=en-gb#creating-invoices-and-getting-paid)
- [Invoice Numbering and Record Keeping](https://help.1stformations.co.uk/accounting-service/invoices-payments?hsLang=en-gb#invoice-numbering-and-record-keeping)
- [Personal Tax for Directors](https://help.1stformations.co.uk/accounting-service/personal-tax-for-directors?hsLang=en-gb#main-content)
- [Drawing Money from Your Company](https://help.1stformations.co.uk/accounting-service/personal-tax-for-directors?hsLang=en-gb#drawing-money-from-your-company)
- [Self Assessment Practical Guide](https://help.1stformations.co.uk/accounting-service/personal-tax-for-directors?hsLang=en-gb#self-assessment-practical-guide)
- [National Insurance and Benefits](https://help.1stformations.co.uk/accounting-service/personal-tax-for-directors?hsLang=en-gb#national-insurance-and-benefits)
- [Household Finances](https://help.1stformations.co.uk/accounting-service/personal-tax-for-directors?hsLang=en-gb#household-finances)
- [Using Xero](https://help.1stformations.co.uk/accounting-service/using-xero?hsLang=en-gb#main-content)
- [Getting Started with Xero](https://help.1stformations.co.uk/accounting-service/using-xero?hsLang=en-gb#getting-started-with-xero)
- [Bank Feeds and Making Tax Digital](https://help.1stformations.co.uk/accounting-service/using-xero?hsLang=en-gb#bank-feeds-and-making-tax-digital)
- [Xero for VAT and Payroll](https://help.1stformations.co.uk/accounting-service/using-xero?hsLang=en-gb#xero-for-vat-and-payroll)
- [Understanding your Numbers](https://help.1stformations.co.uk/accounting-service/understanding-your-numbers?hsLang=en-gb#main-content)
- [Key Accounting Terms Explained](https://help.1stformations.co.uk/accounting-service/understanding-your-numbers?hsLang=en-gb#key-accounting-terms-explained)
- [Reading your Financial Reports](https://help.1stformations.co.uk/accounting-service/understanding-your-numbers?hsLang=en-gb#reading-your-financial-reports)
- [Using Your Numbers to Make Decisions](https://help.1stformations.co.uk/accounting-service/understanding-your-numbers?hsLang=en-gb#using-your-numbers-to-make-decisions)
- [Your Compliance Calendar](https://help.1stformations.co.uk/accounting-service/understanding-your-numbers?hsLang=en-gb#your-compliance-calendar)
- Terms & Conditions
- Privacy Policy
- Cookie Policy
[](https://www.1stformations.co.uk)
[mailto:email@email.com](mailto:email@email.com)
 Copyright 2026 © 1st Formations
We are proud to be a Certified B Corporationâ„¢