Annual Investment Allowance 2025/26: £1 million capital allowances for equipment

Summary

Updated February 2026 — Sources: GOV.UK capital allowances, HMRC CA23153.

The Annual Investment Allowance (AIA) lets businesses deduct the full cost of qualifying plant and machinery in the year of purchase. Combined with full expensing, this provides powerful upfront tax relief for capital investment.

1. AIA basics

Claim up to £1,000,000 per year on qualifying assets. The allowance is shared across all companies under common control. Unused AIA cannot be carried forward — plan purchases within the accounting period.

2. Qualifying assets

• Computers, servers, and IT equipment
• Office furniture and fittings
• Machinery and tools
• Commercial vehicles (vans, lorries)
• Integral features (lifts, air conditioning in buildings)

3. Excluded assets

• Cars (except unused/zero-emission new cars)
• Assets previously used for non-business purposes
• Assets received as gifts
• Structures and buildings (separate 3% allowance applies)

4. Example — £80,000 equipment purchase

A Ltd company buys £80,000 of qualifying IT equipment. AIA claim: £80,000. Corporation tax saving at 19%: £15,200 in the year of purchase. Without AIA, writing down allowance at 18% would give only £14,400 over multiple years.

5. Sources

• GOV.UK — Capital allowances
• GOV.UK — Full expensing