Calculate the tax allowance on tools, equipment and machinery for UK self-employed and businesses. The Annual Investment Allowance (AIA) allows 100% first-year deduction up to £1,000,000.
Tools Tax Allowance Calculator UK 2025/26
Year 1 Tax Saving
Capital Allowances on Tools — 2025/26
UK businesses and self-employed workers can claim tax relief on tools, machinery, and equipment through capital allowances. The Annual Investment Allowance (AIA) allows 100% first-year deduction on qualifying assets up to £1,000,000, giving immediate tax relief.
Capital Allowance Rates 2025/26
Allowance
Rate
Limit
Annual Investment Allowance (AIA)
100%
£1,000,000/year
First Year Allowance
100%
Energy/low-emission only
Main pool writing-down
18%/year
Reducing balance
Special rate pool
6%/year
Long-life assets
Frequently Asked Questions
What tools can I claim capital allowances on?
Hand tools, power tools, machinery, computer equipment, vehicles (vans, not cars above threshold), and other equipment used in your business qualify for capital allowances.
What is the Annual Investment Allowance?
AIA allows you to deduct 100% of the cost of qualifying plant and machinery in the year of purchase, up to £1,000,000. This gives immediate full tax relief rather than spreading it over years.
Can sole traders claim capital allowances?
Yes — self-employed sole traders claim capital allowances through their Self Assessment return on SA104 (partnership) or SA103 (self-employment). AIA is available to sole traders, partnerships, and companies.
Do tools need to be new to claim AIA?
No — second-hand tools and equipment also qualify for AIA. The key requirement is that they are used in your business.
What is writing-down allowance?
For assets not claimed under AIA, you can claim 18% of the pool value per year (reducing balance). This spreads relief over many years — much less favourable than AIA.
Can I claim tools bought for both personal and business use?
You can only claim the business proportion. If a tool is 80% business use, claim 80% of the cost. Keep records to justify the split.
What about small tools under £500?
Items costing less than £500 that are not expected to last more than 2 years can be claimed as revenue expenditure (fully deductible as an expense) rather than as capital allowances.
When should I claim AIA?
Claim AIA in the tax year you purchase the item. You cannot carry forward unused AIA to future years, but you can choose how much of the AIA limit to allocate to each asset.
Does VAT affect capital allowance claims?
If you are VAT registered and can reclaim VAT, claim capital allowances on the net (ex-VAT) cost. If not VAT registered, claim on the gross (inclusive of VAT) cost.
Can I claim capital allowances on leased tools?
Not usually — leased assets belong to the lessor. However, finance leases where you bear the risk of ownership may qualify. Hire purchase payments after the deposit can be claimed.
What is the AIA limit for 2025/26?
The AIA limit remains at £1,000,000 per year as confirmed in the 2024 Budget. This was made permanent (previously £200,000) to support business investment.
What is a first year allowance for green technology?
100% FYA is available for certain energy-saving and low-emission equipment. Electric vehicle charging points, certain boilers, and other energy-efficient equipment qualify. The list is updated by HMRC annually.