Summary of Capital Allowances available in force from April 2014 to 31^st December 2015

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 £500,000 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 95 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 whose CO₂ emissions do not exceed 130 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 130g/km.
• 8% of the residual "written down value" of assets falling into the above category which were purchased in a previous tax year.

The Annual Investment Allowance (AIA) has changed since the last tax year. A hybrid AIA will apply for accounting years which span periods with different AIA.

The above rates apply to companies whose accounting year chargeable to tax ends after 1^st April 2014 and to sole traders whose accounting years end after 6^th April 2014. They also apply to companies and sole traders whose accounting year started on or before 31^st December 2015. The changeover date for the AIA was 6th April 2014 for sole traders and partners paying Income Tax, and 1st April 2014 for Corporation Tax.

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: £250,000 was the AIA applicable to the 15 month period from 1^st January 2013 to April 2014. From April 2014 until 31^st December 2015 the AIA was £500,000. The changeover date for the 2014 rate was 6th April 2014 for sole traders and partners paying Income Tax, and 1st April 2014 for Corporation Tax. After 1^st January 2016 the AIA fell to £200,000