Summary of Capital Allowances available in force from April 2012 to 31^st December 2012

The following capital expenditure may be deducted from income in calculating taxable profits:

• ANNUAL INVESTMENT ALLOWANCE: The full amount of any capital expenditure up to maximum £25,000 per year on most new plant and machinery except for cars. (This figure must be reduced proportionately for shorter accounting periods)
• FIRST YEAR ALLOWANCE: The full amount of capital expenditure on certain specified environmentally friendly assets. Designated assets include cars with CO₂ emissions not more than 110 g/km and new zero emission electric vehicles.
• "MAIN POOL": 18% of the cost of second hand capital assets purchased and new assets not falling outside the above categories such as cars, unless they fall into a special category (see below). Where only part of the purchase cost of an asset is deductible against tax, the remainder of the purchase cost or 'written down value' is carried forward to the next tax year.
• Cars with CO₂ emissions between 110 g/km and 160 g/km.
• 18% of the residual "written down value" of assets falling into the above category and purchased in a previous tax year.
• "SPECIAL RATE POOL": 8% of the purchase cost of certain designated assets including cars with CO₂ emissions over 160g/km.
• 8% of the residual "written down value" of assets falling into the above category which were purchased in a previous tax year.

Capital Allowance writing down rates have changed since the last tax year. Hybrid rates will apply for accounting years which span the two tax years.

The above rates apply to companies whose accounting year chargeable to tax ends on or after 1 April 2012 and to sole traders or partners whose accounting year ends on or after 6 April 2012. Where accounting years span the tax years 2011/12 and 2012/13 hybrid rates will apply for the calculation of writing down allowances (WDA) in the Main Pool and the Special Rate Pool. This is because the rates applicable to these pools have decreased from the last tax year. In 2011/12 the Main Rate was 20% and the Special Rate Pool was 10%. In 2012/13 these fell to 18% and 8% respectively. The hybrid rate is calculated by working out the proportion of the accounting year falling within the earlier tax year, and the remaining proportion falling in the later tax year, then working out the weighted average. The changeover date for the rates was 6th April 2012 for sole traders and partners paying Income Tax, and 1st April 2012 for Corporation Tax.

The maximum Annual Investment Allowance has changed since the last tax year. A hybrid maximum allowance will apply for accounting years which started before April 2012 or ended after December 2012.

The hybrid maximum allowance is calculated by working out the proportion of the accounting year falling within the earlier tax or calendar year, and the remaining proportion falling in the later tax or calendar year, then working out the weighted average of the two maximum annual investment allowances: £100,000 was the AIA for the tax year (2011/12), £25,000 was the AIA for the nine month period April to December 2012 while a higher rate of £25,000 applies to the 15 month period from 1^st January 2013 to April 2014. The changeover date for the 2012 rate was 6th April 2012 for sole traders and partners paying Income Tax, and 1st April 2012 for Corporation Tax.