How to Claim Equipment in the UK (2026 Guide)

Quick answer

Business equipment in the UK is relieved through capital allowances, and in 2026 most purchases are deductible in full in year one. Sole traders, partnerships, and companies can use the Annual Investment Allowance on up to £1 million a year. Companies can use full expensing at 100% with no cap. Any business can use the new 40% first-year allowance from 1 January 2026. What is left goes into the main pool at 14% a year. Cars are excluded from all of these and have their own rules.

Is equipment tax deductible in the UK?

Equipment is capital, so it is not deducted as a running cost. It is relieved through capital allowances, and the practical question is how fast. Four mechanisms are in play for 2026.

The Annual Investment Allowance gives 100% relief on qualifying plant and machinery up to £1 million per year, available to every type of business. GOV.UK sets three exclusions: business cars, items you owned for another reason before using them in the business, and items given to you. Claims must be made in the period you bought the item, with the purchase date fixed by the contract or the payment terms.

Full expensing is a companies-only 100% first-year allowance for main-rate plant and machinery, plus a 50% first-year allowance for special-rate expenditure. It began on 1 April 2023 with a three-year sunset, and that sunset was removed, making it permanent. It requires new and unused assets, excludes cars and assets for leasing, and is uncapped, which is what makes it matter for spend above the AIA ceiling.

The 40% first-year allowance is new. For expenditure from 1 January 2026, any business, incorporated or not, can claim 40% of main-rate expenditure in year one, and the leasing sector is inside it. Second-hand assets, cars, and overseas leasing are excluded. It was introduced alongside a cut in the main-rate writing-down allowance from 18% to 14%, effective 1 April 2026 for corporation tax and 6 April 2026 for income tax, with a hybrid rate for periods straddling the change.

Finally, the pools. Main-rate assets not relieved in year one are written down at 14% a year. Integral features, long-life assets costing more than £100,000 in total, and some vehicles go into the special-rate pool at 6%. A pool at or below £1,000 can be cleared with the small pools allowance.

How much can you claim?

Usually the full cost in year one. Worked example: a sole-trader fabricator buys a £38,000 CNC plasma table and £6,500 of welding equipment. Both are main-rate plant, total £44,500, well under the AIA ceiling, so the whole amount is deducted in the year. At the higher rate that is worth £17,800 of tax. A limited company making the same purchase would use full expensing on the £44,500 and save £11,125 at the 25% main rate of corporation tax.

A second example shows the 40% allowance earning its keep: a partnership that has already used its £1 million AIA on a fit-out buys a further £50,000 of machinery in February 2026. It cannot use full expensing because it is not a company, so it claims the 40% first-year allowance (£20,000) and puts the remaining £30,000 into the main pool at 14%.

Private use restricts every route. A sole trader who uses a £2,000 laptop 25% personally claims 75%. Equipment on hire purchase qualifies once it is brought into use, with the interest deducted separately as a finance cost. Vehicles follow their own CO2-banded rules and are excluded here.

VAT on equipment

A VAT-registered business recovers the 20% VAT on equipment as input VAT, restricted for private use. Equipment bought from an EU or other overseas supplier and imported is subject to import VAT, usually handled through postponed VAT accounting on the return. The capital allowances computation uses the net cost if VAT is recovered and the gross cost if it is not.

Record-keeping requirements

Every piece of equipment belongs in a fixed asset register: description, supplier, invoice date, date brought into use, cost, business-use percentage, allowance claimed, and eventual disposal proceeds. The in-use date decides which period the allowance falls in, and the disposal entry is what prevents a missed balancing charge. Keep invoices for 5 years after the Self Assessment deadline or 6 years for a company.

How to claim, step by step

1. Confirm the item is plant and machinery and not a car, a building, or a repair to an existing asset.
2. Record it in the asset register with the in-use date and business-use percentage.
3. Choose the route: AIA first for most businesses, full expensing for a company with spend above the AIA, the 40% first-year allowance where neither applies.
4. Put any remainder in the correct pool and apply 14% or 6%; clear pools of £1,000 or less with the small pools allowance.
5. Enter the claim in the capital allowances section of the SA103 or the CT600 computation.
6. On disposal, bring the proceeds back into the pool or, for full expensing assets, into an immediate balancing charge.

Common mistakes

• Claiming the AIA on a car. Cars are excluded; only vans and commercial vehicles qualify.
• Companies claiming full expensing on second-hand machinery or on equipment they lease out.
• Applying the old 18% writing-down rate to post-April 2026 expenditure.
• Forgetting that the 40% allowance leaves 60% to be pooled, not deducted next year.
• Selling equipment claimed in full and leaving the proceeds out of the computation.

Software that helps

• Dext captures supplier invoices for equipment so the cost and date are evidenced before they reach the ledger.
• ExpenseFlow reads equipment invoices with frontier vision AI, codes each line to an expense or fixed asset account using the Annual Investment Allowance framing, explains the call under the line, lowers its confidence so a reviewer decides when the invoice does not settle it, and syncs the approved bill to Xero or QuickBooks with the document attached.
• Xero and QuickBooks both include a fixed asset register that tracks the pool and disposal events.

FAQ

See the answered questions above for the AIA, full expensing, the 40% first-year allowance, writing-down rates, and disposals.