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Business
Capital Allowances
Tax relief that lets a business deduct the cost of buying assets like machinery, vehicles, and equipment from its taxable profit.
Capital allowances (also called depreciation for tax purposes) encourage businesses to invest in assets. Different assets have different allowance rates. In the UK, the Annual Investment Allowance allows 100% deduction on many items up to a limit.
It's the taxman's way of saying you can write off the cost of your new tools over time instead of paying tax on the full profit immediately.
Real world: A delivery company buys a new van for £30,000. Instead of deducting the whole cost in year one, it claims capital allowances over several years, reducing its corporation tax each year.
💡 Capital allowances make buying equipment for your business much more tax-efficient.