We bought a new lift for our office last year. We sell horticultural machinery and made £30,000 last year. We hope to make more this time. Can we claim the main pool rate of 18%?

The 3 types of pool are the:

Work out your capital allowances

Writing down allowances

When you buy business assets you can usually deduct the full value from your profits before tax using annual investment allowance (AIA).

Use writing down allowances instead if:

you’ve already claimed AIA on items worth a total of more than the AIA amount

the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

you owned it before you started using it in your business

it was a gift

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.

Rates and pools

If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for.

The 3 types of pool are the:

main pool with a rate of 18%

special rate pool with a rate of 6%

single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

Add the value of all ‘plant and machinery’  you’ve bought to the main rate pool, unless they’re in:

the special rate pool

a single asset pool (for example, because you have chosen to treat them as ‘short life’ assets or you’ve used them outside your business)

Special rate pool

You have to claim a lower rate of 6% on:

parts of a building considered integral - known as ‘integral features’

items with a long life

thermal insulation of buildings

cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

You can claim AIA on these items apart from cars. Only claim writing down allowances at 6% if you’ve already claimed AIA on items worth a total of more than the AIA amount.

Integral features

Integral features are:

lifts, escalators and moving walkways

space and water heating systems

air-conditioning and air cooling systems

hot and cold water systems (but not toilet and kitchen facilities)

electrical systems, including lighting systems

external solar shading

Buildings themselves don’t qualify for capital allowances.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

Put them in the special rate pool if the value of all the long-life items you buy in a single accounting period (the tax year if you’re a sole trader or partner) adds up to £100,000. Put them in the main rate pool if their total value is less than £100,000.

This £100,000 limit is adjusted if your accounting period is more or less than 12 months.

Single asset pools

You might need to create one or more separate pools for single assets that:

have a short life (for assets you aren’t going to keep for a long time)

you use outside your business if you’re a sole trader or a partner

Short life assets

It’s up to you to decide whether you want to treat something as a short life asset. You can’t include:

cars

items you also use outside your business

special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you’re still using the item after 8 years.

Let HMRC know

Let HM Revenue and Customs (HMRC) know on your tax return if you’re a limited company and you decide to create a short life asset pool. You must do this within 2 years of the end of the tax year when you bought the item.

Let HMRC know in writing if you’re a sole trader or partner - include how much the item cost and when you acquired it. The deadline is the online filing deadline (31 January) for the tax year after the one you bought the item in.

Things you also use outside your business

If you use an item outside your business and you’re a sole trader or partner, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you’ve claimed AIA or first year allowances on

Record any items you’ve claimed annual investment allowance (AIA) or first year allowances on in the pool they qualify for. If you claim the full cost of an item you’ll need to write down their value as zero. This will help you to work out whether you owe tax if you sell them.

Items not claimed

Add costs you haven’t claimed first year allowances or annual investment allowance (AIA) on to the pool in the following year.

What to do next

When you know the rate for your items, work out how much you can claim.

Work out what you can claim

You can claim the full cost of the item if you’re claiming:

annual investment allowance (AIA)

first year allowances

You claim based on the rate for items that don’t qualify for AIA or first year allowances.

Work out your allowance

Work out what you can claim separately for each pool.

Take your closing balance from your last accounting period.

Add the value of anything you’ve bought or been given in the current period that qualifies for this pool. Only include VAT if you’re not VAT registered.

Deduct the value of anything you sold or ‘disposed of’ that originally qualified for this pool.

Work out how much you can claim using the correct rate.

Deduct the amount you can claim from the pool to get the closing balance. This is known as the ‘tax written down value’.

Items you use outside your business

For items that are in a single asset pool because you’ve used them outside your business, reduce the amount you can claim by the amount you use them privately.

You still deduct the full amount from your pool to get the closing balance.

Items you use privately that aren’t in a single asset pool

If you start using something outside your business that you’ve already claimed capital allowances on:

add the market value of the item (the amount you’d expect to sell it for) to a single asset pool

deduct the same amount from the pool it was in

If the amount you deduct is more than the balance in the pool, the difference is a ‘balancing charge’ - you must put it on your tax return.

Claiming less than you’re entitled to

You don’t have to claim the full amount you’re entitled to. If you only claim part, the rest stays in your closing balance.

If you have £1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is £1,000 or less before you work out your allowance.

This is called a small pools allowance. It doesn’t apply to single asset pools. You can either claim a small pools allowance or writing down allowances - you can’t claim both.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.

main pool with a rate of 18%

Work out your capital allowances

Writing down allowances

Use writing down allowances instead if:

you’ve already claimed AIA on items worth a total of more than the AIA amount

the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

you owned it before you started using it in your business

it was a gift

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.

Rates and pools

If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for.

The 3 types of pool are the:

main pool with a rate of 18%

special rate pool with a rate of 6%

single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

Add the value of all ‘plant and machinery’  you’ve bought to the main rate pool, unless they’re in:

the special rate pool

Special rate pool

You have to claim a lower rate of 6% on:

parts of a building considered integral - known as ‘integral features’

items with a long life

thermal insulation of buildings

cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

Integral features

Integral features are:

lifts, escalators and moving walkways

space and water heating systems

air-conditioning and air cooling systems

hot and cold water systems (but not toilet and kitchen facilities)

electrical systems, including lighting systems

external solar shading

Buildings themselves don’t qualify for capital allowances.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

This £100,000 limit is adjusted if your accounting period is more or less than 12 months.

Single asset pools

You might need to create one or more separate pools for single assets that:

have a short life (for assets you aren’t going to keep for a long time)

you use outside your business if you’re a sole trader or a partner

Short life assets

It’s up to you to decide whether you want to treat something as a short life asset. You can’t include:

cars

items you also use outside your business

special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you’re still using the item after 8 years.

Let HMRC know

Things you also use outside your business

If you use an item outside your business and you’re a sole trader or partner, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you’ve claimed AIA or first year allowances on

Items not claimed

Add costs you haven’t claimed first year allowances or annual investment allowance (AIA) on to the pool in the following year.

What to do next

When you know the rate for your items, work out how much you can claim.

Work out what you can claim

You can claim the full cost of the item if you’re claiming:

annual investment allowance (AIA)

first year allowances

You claim based on the rate for items that don’t qualify for AIA or first year allowances.

Work out your allowance

Work out what you can claim separately for each pool.

Take your closing balance from your last accounting period.

Deduct the value of anything you sold or ‘disposed of’ that originally qualified for this pool.

Work out how much you can claim using the correct rate.

Deduct the amount you can claim from the pool to get the closing balance. This is known as the ‘tax written down value’.

Items you use outside your business

You still deduct the full amount from your pool to get the closing balance.

Items you use privately that aren’t in a single asset pool

If you start using something outside your business that you’ve already claimed capital allowances on:

add the market value of the item (the amount you’d expect to sell it for) to a single asset pool

deduct the same amount from the pool it was in

Claiming less than you’re entitled to

You don’t have to claim the full amount you’re entitled to. If you only claim part, the rest stays in your closing balance.

If you have £1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is £1,000 or less before you work out your allowance.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.

You have to claim a lower rate of 6% on:

Work out your capital allowances

Writing down allowances

Use writing down allowances instead if:

you’ve already claimed AIA on items worth a total of more than the AIA amount

the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

you owned it before you started using it in your business

it was a gift

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.

Rates and pools

If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for.

The 3 types of pool are the:

main pool with a rate of 18%

special rate pool with a rate of 6%

single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

Add the value of all ‘plant and machinery’  you’ve bought to the main rate pool, unless they’re in:

the special rate pool

Special rate pool

parts of a building considered integral - known as ‘integral features’

items with a long life

thermal insulation of buildings

cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

Integral features

Integral features are:

lifts, escalators and moving walkways

space and water heating systems

air-conditioning and air cooling systems

hot and cold water systems (but not toilet and kitchen facilities)

electrical systems, including lighting systems

external solar shading

Buildings themselves don’t qualify for capital allowances.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

This £100,000 limit is adjusted if your accounting period is more or less than 12 months.

Single asset pools

You might need to create one or more separate pools for single assets that:

have a short life (for assets you aren’t going to keep for a long time)

you use outside your business if you’re a sole trader or a partner

Short life assets

It’s up to you to decide whether you want to treat something as a short life asset. You can’t include:

cars

items you also use outside your business

special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you’re still using the item after 8 years.

Let HMRC know

Things you also use outside your business

If you use an item outside your business and you’re a sole trader or partner, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you’ve claimed AIA or first year allowances on

Items not claimed

Add costs you haven’t claimed first year allowances or annual investment allowance (AIA) on to the pool in the following year.

What to do next

When you know the rate for your items, work out how much you can claim.

Work out what you can claim

You can claim the full cost of the item if you’re claiming:

annual investment allowance (AIA)

first year allowances

You claim based on the rate for items that don’t qualify for AIA or first year allowances.

Work out your allowance

Work out what you can claim separately for each pool.

Take your closing balance from your last accounting period.

Deduct the value of anything you sold or ‘disposed of’ that originally qualified for this pool.

Work out how much you can claim using the correct rate.

Deduct the amount you can claim from the pool to get the closing balance. This is known as the ‘tax written down value’.

Items you use outside your business

You still deduct the full amount from your pool to get the closing balance.

Items you use privately that aren’t in a single asset pool

If you start using something outside your business that you’ve already claimed capital allowances on:

add the market value of the item (the amount you’d expect to sell it for) to a single asset pool

deduct the same amount from the pool it was in

Claiming less than you’re entitled to

You don’t have to claim the full amount you’re entitled to. If you only claim part, the rest stays in your closing balance.

If you have £1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is £1,000 or less before you work out your allowance.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.

parts of a building considered integral - known as ‘integral features’

Work out your capital allowances

Writing down allowances

Use writing down allowances instead if:

you’ve already claimed AIA on items worth a total of more than the AIA amount

the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

you owned it before you started using it in your business

it was a gift

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.

Rates and pools

If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for.

The 3 types of pool are the:

main pool with a rate of 18%

special rate pool with a rate of 6%

single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

Add the value of all ‘plant and machinery’  you’ve bought to the main rate pool, unless they’re in:

the special rate pool

Special rate pool

You have to claim a lower rate of 6% on:

items with a long life

thermal insulation of buildings

cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

Integral features

Integral features are:

lifts, escalators and moving walkways

space and water heating systems

air-conditioning and air cooling systems

hot and cold water systems (but not toilet and kitchen facilities)

electrical systems, including lighting systems

external solar shading

Buildings themselves don’t qualify for capital allowances.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

This £100,000 limit is adjusted if your accounting period is more or less than 12 months.

Single asset pools

You might need to create one or more separate pools for single assets that:

have a short life (for assets you aren’t going to keep for a long time)

you use outside your business if you’re a sole trader or a partner

Short life assets

It’s up to you to decide whether you want to treat something as a short life asset. You can’t include:

cars

items you also use outside your business

special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you’re still using the item after 8 years.

Let HMRC know

Things you also use outside your business

If you use an item outside your business and you’re a sole trader or partner, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you’ve claimed AIA or first year allowances on

Items not claimed

Add costs you haven’t claimed first year allowances or annual investment allowance (AIA) on to the pool in the following year.

What to do next

When you know the rate for your items, work out how much you can claim.

Work out what you can claim

You can claim the full cost of the item if you’re claiming:

annual investment allowance (AIA)

first year allowances

You claim based on the rate for items that don’t qualify for AIA or first year allowances.

Work out your allowance

Work out what you can claim separately for each pool.

Take your closing balance from your last accounting period.

Deduct the value of anything you sold or ‘disposed of’ that originally qualified for this pool.

Work out how much you can claim using the correct rate.

Deduct the amount you can claim from the pool to get the closing balance. This is known as the ‘tax written down value’.

Items you use outside your business

You still deduct the full amount from your pool to get the closing balance.

Items you use privately that aren’t in a single asset pool

If you start using something outside your business that you’ve already claimed capital allowances on:

add the market value of the item (the amount you’d expect to sell it for) to a single asset pool

deduct the same amount from the pool it was in

Claiming less than you’re entitled to

You don’t have to claim the full amount you’re entitled to. If you only claim part, the rest stays in your closing balance.

If you have £1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is £1,000 or less before you work out your allowance.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.

Integral features are:

Work out your capital allowances

Writing down allowances

When you buy business assets you can usually deduct the full value from your profits before tax using annual investment allowance (AIA).

Use writing down allowances instead if:

you’ve already claimed AIA on items worth a total of more than the AIA amount

the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

you owned it before you started using it in your business

it was a gift

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.

Rates and pools

If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for.

The 3 types of pool are the:

main pool with a rate of 18%

special rate pool with a rate of 6%

single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

Add the value of all ‘plant and machinery’  you’ve bought to the main rate pool, unless they’re in:

the special rate pool

Special rate pool

You have to claim a lower rate of 6% on:

parts of a building considered integral - known as ‘integral features’

items with a long life

thermal insulation of buildings

cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

Integral features

Integral features are:

lifts, escalators and moving walkways

space and water heating systems

air-conditioning and air cooling systems

hot and cold water systems (but not toilet and kitchen facilities)

electrical systems, including lighting systems

external solar shading

Buildings themselves don’t qualify for capital allowances.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

This £100,000 limit is adjusted if your accounting period is more or less than 12 months.

Single asset pools

You might need to create one or more separate pools for single assets that:

have a short life (for assets you aren’t going to keep for a long time)

you use outside your business if you’re a sole trader or a partner

Short life assets

It’s up to you to decide whether you want to treat something as a short life asset. You can’t include:

cars

items you also use outside your business

special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you’re still using the item after 8 years.

Let HMRC know

Things you also use outside your business

If you use an item outside your business and you’re a sole trader or partner, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you’ve claimed AIA or first year allowances on

Items not claimed

Add costs you haven’t claimed first year allowances or annual investment allowance (AIA) on to the pool in the following year.

What to do next

When you know the rate for your items, work out how much you can claim.

Work out what you can claim

You can claim the full cost of the item if you’re claiming:

annual investment allowance (AIA)

first year allowances

You claim based on the rate for items that don’t qualify for AIA or first year allowances.

Work out your allowance

Work out what you can claim separately for each pool.

Take your closing balance from your last accounting period.

Deduct the value of anything you sold or ‘disposed of’ that originally qualified for this pool.

Work out how much you can claim using the correct rate.

Deduct the amount you can claim from the pool to get the closing balance. This is known as the ‘tax written down value’.

Items you use outside your business

You still deduct the full amount from your pool to get the closing balance.

Items you use privately that aren’t in a single asset pool

If you start using something outside your business that you’ve already claimed capital allowances on:

add the market value of the item (the amount you’d expect to sell it for) to a single asset pool

deduct the same amount from the pool it was in

Claiming less than you’re entitled to

You don’t have to claim the full amount you’re entitled to. If you only claim part, the rest stays in your closing balance.

If you have £1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is £1,000 or less before you work out your allowance.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.

lifts, escalators and moving walkways

Work out your capital allowances

Writing down allowances

When you buy business assets you can usually deduct the full value from your profits before tax using annual investment allowance (AIA).

Use writing down allowances instead if:

you’ve already claimed AIA on items worth a total of more than the AIA amount

the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

you owned it before you started using it in your business

it was a gift

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.

Rates and pools

If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for.

The 3 types of pool are the:

main pool with a rate of 18%

special rate pool with a rate of 6%

single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

Add the value of all ‘plant and machinery’  you’ve bought to the main rate pool, unless they’re in:

the special rate pool

Special rate pool

You have to claim a lower rate of 6% on:

parts of a building considered integral - known as ‘integral features’

items with a long life

thermal insulation of buildings

cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

Integral features

Integral features are:

lifts, escalators and moving walkways

space and water heating systems

air-conditioning and air cooling systems

hot and cold water systems (but not toilet and kitchen facilities)

electrical systems, including lighting systems

external solar shading

Buildings themselves don’t qualify for capital allowances.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

This £100,000 limit is adjusted if your accounting period is more or less than 12 months.

Single asset pools

You might need to create one or more separate pools for single assets that:

have a short life (for assets you aren’t going to keep for a long time)

you use outside your business if you’re a sole trader or a partner

Short life assets

It’s up to you to decide whether you want to treat something as a short life asset. You can’t include:

cars

items you also use outside your business

special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you’re still using the item after 8 years.

Let HMRC know

Things you also use outside your business

If you use an item outside your business and you’re a sole trader or partner, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you’ve claimed AIA or first year allowances on

Items not claimed

Add costs you haven’t claimed first year allowances or annual investment allowance (AIA) on to the pool in the following year.

What to do next

When you know the rate for your items, work out how much you can claim.

Work out what you can claim

You can claim the full cost of the item if you’re claiming:

annual investment allowance (AIA)

first year allowances

You claim based on the rate for items that don’t qualify for AIA or first year allowances.

Work out your allowance

Work out what you can claim separately for each pool.

Take your closing balance from your last accounting period.

Deduct the value of anything you sold or ‘disposed of’ that originally qualified for this pool.

Work out how much you can claim using the correct rate.

Deduct the amount you can claim from the pool to get the closing balance. This is known as the ‘tax written down value’.

Items you use outside your business

You still deduct the full amount from your pool to get the closing balance.

Items you use privately that aren’t in a single asset pool

If you start using something outside your business that you’ve already claimed capital allowances on:

add the market value of the item (the amount you’d expect to sell it for) to a single asset pool

deduct the same amount from the pool it was in

Claiming less than you’re entitled to

You don’t have to claim the full amount you’re entitled to. If you only claim part, the rest stays in your closing balance.

If you have £1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is £1,000 or less before you work out your allowance.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.


A few months ago I bought expensive table saw for my personal use but I want to use it in my business from now. I took a loan to buy it and there are still 10 monthly payments outstanding. Can I still use annual investment allowance in this case?

When you buy business assets you can usually deduct the full value from your profits before tax using annual investment allowance (AIA).

Work out your capital allowances

Writing down allowances

Use writing down allowances instead if:

you’ve already claimed AIA on items worth a total of more than the AIA amount

the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

you owned it before you started using it in your business

it was a gift

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.

Rates and pools

If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for.

The 3 types of pool are the:

main pool with a rate of 18%

special rate pool with a rate of 6%

single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

Add the value of all ‘plant and machinery’  you’ve bought to the main rate pool, unless they’re in:

the special rate pool

a single asset pool (for example, because you have chosen to treat them as ‘short life’ assets or you’ve used them outside your business)

Special rate pool

You have to claim a lower rate of 6% on:

parts of a building considered integral - known as ‘integral features’

items with a long life

thermal insulation of buildings

cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

You can claim AIA on these items apart from cars. Only claim writing down allowances at 6% if you’ve already claimed AIA on items worth a total of more than the AIA amount.

Integral features

Integral features are:

lifts, escalators and moving walkways

space and water heating systems

air-conditioning and air cooling systems

hot and cold water systems (but not toilet and kitchen facilities)

electrical systems, including lighting systems

external solar shading

Buildings themselves don’t qualify for capital allowances.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

Put them in the special rate pool if the value of all the long-life items you buy in a single accounting period (the tax year if you’re a sole trader or partner) adds up to £100,000. Put them in the main rate pool if their total value is less than £100,000.

This £100,000 limit is adjusted if your accounting period is more or less than 12 months.

Single asset pools

You might need to create one or more separate pools for single assets that:

have a short life (for assets you aren’t going to keep for a long time)

you use outside your business if you’re a sole trader or a partner

Short life assets

It’s up to you to decide whether you want to treat something as a short life asset. You can’t include:

cars

items you also use outside your business

special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you’re still using the item after 8 years.

Let HMRC know

Let HM Revenue and Customs (HMRC) know on your tax return if you’re a limited company and you decide to create a short life asset pool. You must do this within 2 years of the end of the tax year when you bought the item.

Let HMRC know in writing if you’re a sole trader or partner - include how much the item cost and when you acquired it. The deadline is the online filing deadline (31 January) for the tax year after the one you bought the item in.

Things you also use outside your business

If you use an item outside your business and you’re a sole trader or partner, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you’ve claimed AIA or first year allowances on

Record any items you’ve claimed annual investment allowance (AIA) or first year allowances on in the pool they qualify for. If you claim the full cost of an item you’ll need to write down their value as zero. This will help you to work out whether you owe tax if you sell them.

Items not claimed

Add costs you haven’t claimed first year allowances or annual investment allowance (AIA) on to the pool in the following year.

What to do next

When you know the rate for your items, work out how much you can claim.

Work out what you can claim

You can claim the full cost of the item if you’re claiming:

annual investment allowance (AIA)

first year allowances

You claim based on the rate for items that don’t qualify for AIA or first year allowances.

Work out your allowance

Work out what you can claim separately for each pool.

Take your closing balance from your last accounting period.

Add the value of anything you’ve bought or been given in the current period that qualifies for this pool. Only include VAT if you’re not VAT registered.

Deduct the value of anything you sold or ‘disposed of’ that originally qualified for this pool.

Work out how much you can claim using the correct rate.

Deduct the amount you can claim from the pool to get the closing balance. This is known as the ‘tax written down value’.

Items you use outside your business

For items that are in a single asset pool because you’ve used them outside your business, reduce the amount you can claim by the amount you use them privately.

You still deduct the full amount from your pool to get the closing balance.

Items you use privately that aren’t in a single asset pool

If you start using something outside your business that you’ve already claimed capital allowances on:

add the market value of the item (the amount you’d expect to sell it for) to a single asset pool

deduct the same amount from the pool it was in

If the amount you deduct is more than the balance in the pool, the difference is a ‘balancing charge’ - you must put it on your tax return.

Claiming less than you’re entitled to

You don’t have to claim the full amount you’re entitled to. If you only claim part, the rest stays in your closing balance.

If you have £1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is £1,000 or less before you work out your allowance.

This is called a small pools allowance. It doesn’t apply to single asset pools. You can either claim a small pools allowance or writing down allowances - you can’t claim both.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.

Use writing down allowances instead if:

Work out your capital allowances

Writing down allowances

Use writing down allowances instead if:

you’ve already claimed AIA on items worth a total of more than the AIA amount

the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

you owned it before you started using it in your business

it was a gift

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.

Rates and pools

If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for.

The 3 types of pool are the:

main pool with a rate of 18%

special rate pool with a rate of 6%

single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

Add the value of all ‘plant and machinery’  you’ve bought to the main rate pool, unless they’re in:

the special rate pool

Special rate pool

You have to claim a lower rate of 6% on:

parts of a building considered integral - known as ‘integral features’

items with a long life

thermal insulation of buildings

cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

Integral features

Integral features are:

lifts, escalators and moving walkways

space and water heating systems

air-conditioning and air cooling systems

hot and cold water systems (but not toilet and kitchen facilities)

electrical systems, including lighting systems

external solar shading

Buildings themselves don’t qualify for capital allowances.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

This £100,000 limit is adjusted if your accounting period is more or less than 12 months.

Single asset pools

You might need to create one or more separate pools for single assets that:

have a short life (for assets you aren’t going to keep for a long time)

you use outside your business if you’re a sole trader or a partner

Short life assets

It’s up to you to decide whether you want to treat something as a short life asset. You can’t include:

cars

items you also use outside your business

special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you’re still using the item after 8 years.

Let HMRC know

Things you also use outside your business

If you use an item outside your business and you’re a sole trader or partner, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you’ve claimed AIA or first year allowances on

Items not claimed

Add costs you haven’t claimed first year allowances or annual investment allowance (AIA) on to the pool in the following year.

What to do next

When you know the rate for your items, work out how much you can claim.

Work out what you can claim

You can claim the full cost of the item if you’re claiming:

annual investment allowance (AIA)

first year allowances

You claim based on the rate for items that don’t qualify for AIA or first year allowances.

Work out your allowance

Work out what you can claim separately for each pool.

Take your closing balance from your last accounting period.

Deduct the value of anything you sold or ‘disposed of’ that originally qualified for this pool.

Work out how much you can claim using the correct rate.

Deduct the amount you can claim from the pool to get the closing balance. This is known as the ‘tax written down value’.

Items you use outside your business

You still deduct the full amount from your pool to get the closing balance.

Items you use privately that aren’t in a single asset pool

If you start using something outside your business that you’ve already claimed capital allowances on:

add the market value of the item (the amount you’d expect to sell it for) to a single asset pool

deduct the same amount from the pool it was in

Claiming less than you’re entitled to

You don’t have to claim the full amount you’re entitled to. If you only claim part, the rest stays in your closing balance.

If you have £1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is £1,000 or less before you work out your allowance.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.

the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Work out your capital allowances

Writing down allowances

Use writing down allowances instead if:

you’ve already claimed AIA on items worth a total of more than the AIA amount

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

you owned it before you started using it in your business

it was a gift

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.

Rates and pools

If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for.

The 3 types of pool are the:

main pool with a rate of 18%

special rate pool with a rate of 6%

single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

Add the value of all ‘plant and machinery’  you’ve bought to the main rate pool, unless they’re in:

the special rate pool

Special rate pool

You have to claim a lower rate of 6% on:

parts of a building considered integral - known as ‘integral features’

items with a long life

thermal insulation of buildings

cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

Integral features

Integral features are:

lifts, escalators and moving walkways

space and water heating systems

air-conditioning and air cooling systems

hot and cold water systems (but not toilet and kitchen facilities)

electrical systems, including lighting systems

external solar shading

Buildings themselves don’t qualify for capital allowances.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

This £100,000 limit is adjusted if your accounting period is more or less than 12 months.

Single asset pools

You might need to create one or more separate pools for single assets that:

have a short life (for assets you aren’t going to keep for a long time)

you use outside your business if you’re a sole trader or a partner

Short life assets

It’s up to you to decide whether you want to treat something as a short life asset. You can’t include:

cars

items you also use outside your business

special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you’re still using the item after 8 years.

Let HMRC know

Things you also use outside your business

If you use an item outside your business and you’re a sole trader or partner, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you’ve claimed AIA or first year allowances on

Items not claimed

Add costs you haven’t claimed first year allowances or annual investment allowance (AIA) on to the pool in the following year.

What to do next

When you know the rate for your items, work out how much you can claim.

Work out what you can claim

You can claim the full cost of the item if you’re claiming:

annual investment allowance (AIA)

first year allowances

You claim based on the rate for items that don’t qualify for AIA or first year allowances.

Work out your allowance

Work out what you can claim separately for each pool.

Take your closing balance from your last accounting period.

Deduct the value of anything you sold or ‘disposed of’ that originally qualified for this pool.

Work out how much you can claim using the correct rate.

Deduct the amount you can claim from the pool to get the closing balance. This is known as the ‘tax written down value’.

Items you use outside your business

You still deduct the full amount from your pool to get the closing balance.

Items you use privately that aren’t in a single asset pool

If you start using something outside your business that you’ve already claimed capital allowances on:

add the market value of the item (the amount you’d expect to sell it for) to a single asset pool

deduct the same amount from the pool it was in

Claiming less than you’re entitled to

You don’t have to claim the full amount you’re entitled to. If you only claim part, the rest stays in your closing balance.

If you have £1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is £1,000 or less before you work out your allowance.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

Work out your capital allowances

Writing down allowances

Use writing down allowances instead if:

you’ve already claimed AIA on items worth a total of more than the AIA amount

the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

Work out the value of your item

you owned it before you started using it in your business

it was a gift

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.

Rates and pools

If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for.

The 3 types of pool are the:

main pool with a rate of 18%

special rate pool with a rate of 6%

single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

Add the value of all ‘plant and machinery’  you’ve bought to the main rate pool, unless they’re in:

the special rate pool

Special rate pool

You have to claim a lower rate of 6% on:

parts of a building considered integral - known as ‘integral features’

items with a long life

thermal insulation of buildings

cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

Integral features

Integral features are:

lifts, escalators and moving walkways

space and water heating systems

air-conditioning and air cooling systems

hot and cold water systems (but not toilet and kitchen facilities)

electrical systems, including lighting systems

external solar shading

Buildings themselves don’t qualify for capital allowances.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

This £100,000 limit is adjusted if your accounting period is more or less than 12 months.

Single asset pools

You might need to create one or more separate pools for single assets that:

have a short life (for assets you aren’t going to keep for a long time)

you use outside your business if you’re a sole trader or a partner

Short life assets

It’s up to you to decide whether you want to treat something as a short life asset. You can’t include:

cars

items you also use outside your business

special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you’re still using the item after 8 years.

Let HMRC know

Things you also use outside your business

If you use an item outside your business and you’re a sole trader or partner, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you’ve claimed AIA or first year allowances on

Items not claimed

Add costs you haven’t claimed first year allowances or annual investment allowance (AIA) on to the pool in the following year.

What to do next

When you know the rate for your items, work out how much you can claim.

Work out what you can claim

You can claim the full cost of the item if you’re claiming:

annual investment allowance (AIA)

first year allowances

You claim based on the rate for items that don’t qualify for AIA or first year allowances.

Work out your allowance

Work out what you can claim separately for each pool.

Take your closing balance from your last accounting period.

Deduct the value of anything you sold or ‘disposed of’ that originally qualified for this pool.

Work out how much you can claim using the correct rate.

Deduct the amount you can claim from the pool to get the closing balance. This is known as the ‘tax written down value’.

Items you use outside your business

You still deduct the full amount from your pool to get the closing balance.

Items you use privately that aren’t in a single asset pool

If you start using something outside your business that you’ve already claimed capital allowances on:

add the market value of the item (the amount you’d expect to sell it for) to a single asset pool

deduct the same amount from the pool it was in

Claiming less than you’re entitled to

You don’t have to claim the full amount you’re entitled to. If you only claim part, the rest stays in your closing balance.

If you have £1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is £1,000 or less before you work out your allowance.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.

you owned it before you started using it in your business

Work out your capital allowances

Writing down allowances

When you buy business assets you can usually deduct the full value from your profits before tax using annual investment allowance (AIA).

Use writing down allowances instead if:

you’ve already claimed AIA on items worth a total of more than the AIA amount

the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

it was a gift

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.

Rates and pools

If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for.

The 3 types of pool are the:

main pool with a rate of 18%

special rate pool with a rate of 6%

single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

Add the value of all ‘plant and machinery’  you’ve bought to the main rate pool, unless they’re in:

the special rate pool

Special rate pool

You have to claim a lower rate of 6% on:

parts of a building considered integral - known as ‘integral features’

items with a long life

thermal insulation of buildings

cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

Integral features

Integral features are:

lifts, escalators and moving walkways

space and water heating systems

air-conditioning and air cooling systems

hot and cold water systems (but not toilet and kitchen facilities)

electrical systems, including lighting systems

external solar shading

Buildings themselves don’t qualify for capital allowances.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

This £100,000 limit is adjusted if your accounting period is more or less than 12 months.

Single asset pools

You might need to create one or more separate pools for single assets that:

have a short life (for assets you aren’t going to keep for a long time)

you use outside your business if you’re a sole trader or a partner

Short life assets

It’s up to you to decide whether you want to treat something as a short life asset. You can’t include:

cars

items you also use outside your business

special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you’re still using the item after 8 years.

Let HMRC know

Things you also use outside your business

If you use an item outside your business and you’re a sole trader or partner, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you’ve claimed AIA or first year allowances on

Items not claimed

Add costs you haven’t claimed first year allowances or annual investment allowance (AIA) on to the pool in the following year.

What to do next

When you know the rate for your items, work out how much you can claim.

Work out what you can claim

You can claim the full cost of the item if you’re claiming:

annual investment allowance (AIA)

first year allowances

You claim based on the rate for items that don’t qualify for AIA or first year allowances.

Work out your allowance

Work out what you can claim separately for each pool.

Take your closing balance from your last accounting period.

Deduct the value of anything you sold or ‘disposed of’ that originally qualified for this pool.

Work out how much you can claim using the correct rate.

Deduct the amount you can claim from the pool to get the closing balance. This is known as the ‘tax written down value’.

Items you use outside your business

You still deduct the full amount from your pool to get the closing balance.

Items you use privately that aren’t in a single asset pool

If you start using something outside your business that you’ve already claimed capital allowances on:

add the market value of the item (the amount you’d expect to sell it for) to a single asset pool

deduct the same amount from the pool it was in

Claiming less than you’re entitled to

You don’t have to claim the full amount you’re entitled to. If you only claim part, the rest stays in your closing balance.

If you have £1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is £1,000 or less before you work out your allowance.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.

Work out your capital allowances

Writing down allowances

When you buy business assets you can usually deduct the full value from your profits before tax using annual investment allowance (AIA).

Use writing down allowances instead if:

you’ve already claimed AIA on items worth a total of more than the AIA amount

the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

you owned it before you started using it in your business

it was a gift

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.

Rates and pools

If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for.

The 3 types of pool are the:

main pool with a rate of 18%

special rate pool with a rate of 6%

single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

Add the value of all ‘plant and machinery’  you’ve bought to the main rate pool, unless they’re in:

the special rate pool

Special rate pool

You have to claim a lower rate of 6% on:

parts of a building considered integral - known as ‘integral features’

items with a long life

thermal insulation of buildings

cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

Integral features

Integral features are:

lifts, escalators and moving walkways

space and water heating systems

air-conditioning and air cooling systems

hot and cold water systems (but not toilet and kitchen facilities)

electrical systems, including lighting systems

external solar shading

Buildings themselves don’t qualify for capital allowances.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

This £100,000 limit is adjusted if your accounting period is more or less than 12 months.

Single asset pools

You might need to create one or more separate pools for single assets that:

have a short life (for assets you aren’t going to keep for a long time)

you use outside your business if you’re a sole trader or a partner

Short life assets

It’s up to you to decide whether you want to treat something as a short life asset. You can’t include:

cars

items you also use outside your business

special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you’re still using the item after 8 years.

Let HMRC know

Things you also use outside your business

If you use an item outside your business and you’re a sole trader or partner, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you’ve claimed AIA or first year allowances on

Items not claimed

Add costs you haven’t claimed first year allowances or annual investment allowance (AIA) on to the pool in the following year.

What to do next

When you know the rate for your items, work out how much you can claim.

Work out what you can claim

You can claim the full cost of the item if you’re claiming:

annual investment allowance (AIA)

first year allowances

You claim based on the rate for items that don’t qualify for AIA or first year allowances.

Work out your allowance

Work out what you can claim separately for each pool.

Take your closing balance from your last accounting period.

Deduct the value of anything you sold or ‘disposed of’ that originally qualified for this pool.

Work out how much you can claim using the correct rate.

Deduct the amount you can claim from the pool to get the closing balance. This is known as the ‘tax written down value’.

Items you use outside your business

You still deduct the full amount from your pool to get the closing balance.

Items you use privately that aren’t in a single asset pool

If you start using something outside your business that you’ve already claimed capital allowances on:

add the market value of the item (the amount you’d expect to sell it for) to a single asset pool

deduct the same amount from the pool it was in

Claiming less than you’re entitled to

You don’t have to claim the full amount you’re entitled to. If you only claim part, the rest stays in your closing balance.

If you have £1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is £1,000 or less before you work out your allowance.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.


I run a transport limited company and I started trading the same day the company was set up.I want to file my returns at the end of my tax year. Can i get a worked example on how i can file my returns to cover full financial year?

Action | Date

Your limited company's first accounts and Company Tax Return

Overview

When you set up your limited company, you automatically get different reporting dates for the first:

annual accounts you send to Companies House

Company Tax Return you send to HM Revenue and Customs (HMRC)

You may also have to send (‘file’) 2 tax returns to cover your first year in business.

Annual accounts

Your first accounts usually cover more than 12 months. This is because they:

start on the day your company was set up (‘incorporated’)

end on the ‘accounting reference date’ that Companies House sets for the end of your company’s financial year - this is the last day of the month your company was set up

Company Tax Return

The period covered by your tax return (your ‘accounting period’ for Corporation Tax) can’t be longer than 12 months. So you may have to file 2 tax returns to cover the period of your first accounts. If you do, you’ll also have 2 payment deadlines.

In following years you then normally only file one tax return - and it will usually cover the same financial year as your accounts.

What you must do

The dates of your first tax return - and whether you file 2 or one - depend on whether your company:

started trading on the same day it was set up

didn’t start trading until after it was set up

You started trading the day your company set up

File 2 Company Tax Returns if your company started trading on the same day it was set up - one for your company’s first 12 months and one for the rest of the time covered by your company’s first accounts.

Example

Action | Date

Company set up and started trading | 11 May 2013

First accounting period for Corporation Tax ends | 10 May 2014

Accounting reference date | 31 May 2014

Second accounting period for Corporation Tax ends | 31 May 2014

Prepare your first set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for 11 May 2013 to 10 May 2014

second tax return for 11 to 31 May 2014

After you do this, your accounts and tax returns will normally cover your company’s financial year from 1 June to 31 May.

You started trading after your company set up

Limited companies can be ‘dormant’ for Corporation Tax between setting up (‘incorporating’) and starting to trade for the first time.

HM Revenue and Customs (HMRC) has detailed guidance on what counts as dormant for Corporation Tax.

You tell HMRC the date that you started to trade when you register for Corporation Tax.

What you have to do if your company was dormant depends on whether you registered for Corporation Tax before your accounting reference date.

You registered for Corporation Tax before your accounting reference date

You usually:

don’t file a tax return for the period you were dormant

prepare your first tax return to cover the period you were trading

File 2 tax returns if you were trading for more than 12 months - one for the first 12 months of trading and one for the rest of the time.

Example

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Register for Corporation Tax | 26 August 2013

Accounting reference date | 31 May 2014

Prepare accounts for 11 May 2013 to 31 May 2014. Then file one tax return for your trading period from 22 July 2013 to 31 May 2014.

After you do this, your dates for accounts and tax returns will normally match your company’s financial year from 1 June to 31 May every year.

Check the ‘notice to deliver a Company Tax Return’ you get after your first year. If it covers your dormant and trading periods you must file 2 tax returns - one for your trading period and one for your dormant period.

You didn’t register for Corporation Tax before your accounting reference date

You must file 2 tax returns - one for the period you were dormant and one for the period you were trading.

Example:

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Accounting reference date | 31 May 2014

Prepare one set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for your dormant period from 11 May to 21 July 2013

second tax return for your trading period from 22 July 2013 to 31 May 2014

Company set up and started trading | 11 May 2013

Overview

When you set up your limited company, you automatically get different reporting dates for the first:

annual accounts you send to Companies House

Company Tax Return you send to HM Revenue and Customs (HMRC)

You may also have to send (‘file’) 2 tax returns to cover your first year in business.

Annual accounts

Your first accounts usually cover more than 12 months. This is because they:

start on the day your company was set up (‘incorporated’)

Company Tax Return

In following years you then normally only file one tax return - and it will usually cover the same financial year as your accounts.

What you must do

The dates of your first tax return - and whether you file 2 or one - depend on whether your company:

started trading on the same day it was set up

didn’t start trading until after it was set up

You started trading the day your company set up

Example

Action | Date

First accounting period for Corporation Tax ends | 10 May 2014

Accounting reference date | 31 May 2014

Second accounting period for Corporation Tax ends | 31 May 2014

Prepare your first set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for 11 May 2013 to 10 May 2014

second tax return for 11 to 31 May 2014

After you do this, your accounts and tax returns will normally cover your company’s financial year from 1 June to 31 May.

You started trading after your company set up

Limited companies can be ‘dormant’ for Corporation Tax between setting up (‘incorporating’) and starting to trade for the first time.

HM Revenue and Customs (HMRC) has detailed guidance on what counts as dormant for Corporation Tax.

You tell HMRC the date that you started to trade when you register for Corporation Tax.

You registered for Corporation Tax before your accounting reference date

You usually:

don’t file a tax return for the period you were dormant

prepare your first tax return to cover the period you were trading

Example

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Register for Corporation Tax | 26 August 2013

Accounting reference date | 31 May 2014

Prepare accounts for 11 May 2013 to 31 May 2014. Then file one tax return for your trading period from 22 July 2013 to 31 May 2014.

You didn’t register for Corporation Tax before your accounting reference date

You must file 2 tax returns - one for the period you were dormant and one for the period you were trading.

Example:

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Accounting reference date | 31 May 2014

Prepare one set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for your dormant period from 11 May to 21 July 2013

second tax return for your trading period from 22 July 2013 to 31 May 2014

First accounting period for Corporation Tax ends | 10 May 2014

Overview

When you set up your limited company, you automatically get different reporting dates for the first:

annual accounts you send to Companies House

Company Tax Return you send to HM Revenue and Customs (HMRC)

You may also have to send (‘file’) 2 tax returns to cover your first year in business.

Annual accounts

Your first accounts usually cover more than 12 months. This is because they:

start on the day your company was set up (‘incorporated’)

Company Tax Return

In following years you then normally only file one tax return - and it will usually cover the same financial year as your accounts.

What you must do

The dates of your first tax return - and whether you file 2 or one - depend on whether your company:

started trading on the same day it was set up

didn’t start trading until after it was set up

You started trading the day your company set up

Example

Action | Date

Company set up and started trading | 11 May 2013

Accounting reference date | 31 May 2014

Second accounting period for Corporation Tax ends | 31 May 2014

Prepare your first set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for 11 May 2013 to 10 May 2014

second tax return for 11 to 31 May 2014

After you do this, your accounts and tax returns will normally cover your company’s financial year from 1 June to 31 May.

You started trading after your company set up

Limited companies can be ‘dormant’ for Corporation Tax between setting up (‘incorporating’) and starting to trade for the first time.

HM Revenue and Customs (HMRC) has detailed guidance on what counts as dormant for Corporation Tax.

You tell HMRC the date that you started to trade when you register for Corporation Tax.

You registered for Corporation Tax before your accounting reference date

You usually:

don’t file a tax return for the period you were dormant

prepare your first tax return to cover the period you were trading

Example

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Register for Corporation Tax | 26 August 2013

Accounting reference date | 31 May 2014

Prepare accounts for 11 May 2013 to 31 May 2014. Then file one tax return for your trading period from 22 July 2013 to 31 May 2014.

You didn’t register for Corporation Tax before your accounting reference date

You must file 2 tax returns - one for the period you were dormant and one for the period you were trading.

Example:

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Accounting reference date | 31 May 2014

Prepare one set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for your dormant period from 11 May to 21 July 2013

second tax return for your trading period from 22 July 2013 to 31 May 2014

Accounting reference date | 31 May 2014

Overview

When you set up your limited company, you automatically get different reporting dates for the first:

annual accounts you send to Companies House

Company Tax Return you send to HM Revenue and Customs (HMRC)

You may also have to send (‘file’) 2 tax returns to cover your first year in business.

Annual accounts

Your first accounts usually cover more than 12 months. This is because they:

start on the day your company was set up (‘incorporated’)

Company Tax Return

In following years you then normally only file one tax return - and it will usually cover the same financial year as your accounts.

What you must do

The dates of your first tax return - and whether you file 2 or one - depend on whether your company:

started trading on the same day it was set up

didn’t start trading until after it was set up

You started trading the day your company set up

Example

Action | Date

Company set up and started trading | 11 May 2013

First accounting period for Corporation Tax ends | 10 May 2014

Accounting reference date | 31 May 2014

Second accounting period for Corporation Tax ends | 31 May 2014

Prepare your first set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for 11 May 2013 to 10 May 2014

second tax return for 11 to 31 May 2014

After you do this, your accounts and tax returns will normally cover your company’s financial year from 1 June to 31 May.

You started trading after your company set up

Limited companies can be ‘dormant’ for Corporation Tax between setting up (‘incorporating’) and starting to trade for the first time.

HM Revenue and Customs (HMRC) has detailed guidance on what counts as dormant for Corporation Tax.

You tell HMRC the date that you started to trade when you register for Corporation Tax.

You registered for Corporation Tax before your accounting reference date

You usually:

don’t file a tax return for the period you were dormant

prepare your first tax return to cover the period you were trading

Example

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Register for Corporation Tax | 26 August 2013

Accounting reference date | 31 May 2014

Prepare accounts for 11 May 2013 to 31 May 2014. Then file one tax return for your trading period from 22 July 2013 to 31 May 2014.

You didn’t register for Corporation Tax before your accounting reference date

You must file 2 tax returns - one for the period you were dormant and one for the period you were trading.

Example:

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Accounting reference date | 31 May 2014

Prepare one set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for your dormant period from 11 May to 21 July 2013

second tax return for your trading period from 22 July 2013 to 31 May 2014

Second accounting period for Corporation Tax ends | 31 May 2014

Overview

When you set up your limited company, you automatically get different reporting dates for the first:

annual accounts you send to Companies House

Company Tax Return you send to HM Revenue and Customs (HMRC)

You may also have to send (‘file’) 2 tax returns to cover your first year in business.

Annual accounts

Your first accounts usually cover more than 12 months. This is because they:

start on the day your company was set up (‘incorporated’)

Company Tax Return

In following years you then normally only file one tax return - and it will usually cover the same financial year as your accounts.

What you must do

The dates of your first tax return - and whether you file 2 or one - depend on whether your company:

started trading on the same day it was set up

didn’t start trading until after it was set up

You started trading the day your company set up

Example

Action | Date

Company set up and started trading | 11 May 2013

First accounting period for Corporation Tax ends | 10 May 2014

Accounting reference date | 31 May 2014

Second accounting period for Corporation Tax ends | 31 May 2014

Prepare your first set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for 11 May 2013 to 10 May 2014

second tax return for 11 to 31 May 2014

After you do this, your accounts and tax returns will normally cover your company’s financial year from 1 June to 31 May.

You started trading after your company set up

Limited companies can be ‘dormant’ for Corporation Tax between setting up (‘incorporating’) and starting to trade for the first time.

HM Revenue and Customs (HMRC) has detailed guidance on what counts as dormant for Corporation Tax.

You tell HMRC the date that you started to trade when you register for Corporation Tax.

You registered for Corporation Tax before your accounting reference date

You usually:

don’t file a tax return for the period you were dormant

prepare your first tax return to cover the period you were trading

Example

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Register for Corporation Tax | 26 August 2013

Accounting reference date | 31 May 2014

Prepare accounts for 11 May 2013 to 31 May 2014. Then file one tax return for your trading period from 22 July 2013 to 31 May 2014.

You didn’t register for Corporation Tax before your accounting reference date

You must file 2 tax returns - one for the period you were dormant and one for the period you were trading.

Example:

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Accounting reference date | 31 May 2014

Prepare one set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for your dormant period from 11 May to 21 July 2013

second tax return for your trading period from 22 July 2013 to 31 May 2014

Prepare your first set of accounts for 11 May 2013 to 31 May 2014. Then file your:

Overview

When you set up your limited company, you automatically get different reporting dates for the first:

annual accounts you send to Companies House

Company Tax Return you send to HM Revenue and Customs (HMRC)

You may also have to send (‘file’) 2 tax returns to cover your first year in business.

Annual accounts

Your first accounts usually cover more than 12 months. This is because they:

start on the day your company was set up (‘incorporated’)

Company Tax Return

In following years you then normally only file one tax return - and it will usually cover the same financial year as your accounts.

What you must do

The dates of your first tax return - and whether you file 2 or one - depend on whether your company:

started trading on the same day it was set up

didn’t start trading until after it was set up

You started trading the day your company set up

Example

Action | Date

Company set up and started trading | 11 May 2013

First accounting period for Corporation Tax ends | 10 May 2014

Accounting reference date | 31 May 2014

Second accounting period for Corporation Tax ends | 31 May 2014

Prepare your first set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for 11 May 2013 to 10 May 2014

second tax return for 11 to 31 May 2014

After you do this, your accounts and tax returns will normally cover your company’s financial year from 1 June to 31 May.

You started trading after your company set up

Limited companies can be ‘dormant’ for Corporation Tax between setting up (‘incorporating’) and starting to trade for the first time.

HM Revenue and Customs (HMRC) has detailed guidance on what counts as dormant for Corporation Tax.

You tell HMRC the date that you started to trade when you register for Corporation Tax.

You registered for Corporation Tax before your accounting reference date

You usually:

don’t file a tax return for the period you were dormant

prepare your first tax return to cover the period you were trading

Example

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Register for Corporation Tax | 26 August 2013

Accounting reference date | 31 May 2014

Prepare accounts for 11 May 2013 to 31 May 2014. Then file one tax return for your trading period from 22 July 2013 to 31 May 2014.

You didn’t register for Corporation Tax before your accounting reference date

You must file 2 tax returns - one for the period you were dormant and one for the period you were trading.

Example:

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Accounting reference date | 31 May 2014

Prepare one set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for your dormant period from 11 May to 21 July 2013

second tax return for your trading period from 22 July 2013 to 31 May 2014

first tax return for 11 May 2013 to 10 May 2014

Overview

When you set up your limited company, you automatically get different reporting dates for the first:

annual accounts you send to Companies House

Company Tax Return you send to HM Revenue and Customs (HMRC)

You may also have to send (‘file’) 2 tax returns to cover your first year in business.

Annual accounts

Your first accounts usually cover more than 12 months. This is because they:

start on the day your company was set up (‘incorporated’)

Company Tax Return

In following years you then normally only file one tax return - and it will usually cover the same financial year as your accounts.

What you must do

The dates of your first tax return - and whether you file 2 or one - depend on whether your company:

started trading on the same day it was set up

didn’t start trading until after it was set up

You started trading the day your company set up

Example

Action | Date

Company set up and started trading | 11 May 2013

First accounting period for Corporation Tax ends | 10 May 2014

Accounting reference date | 31 May 2014

Second accounting period for Corporation Tax ends | 31 May 2014

Prepare your first set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for 11 May 2013 to 10 May 2014

second tax return for 11 to 31 May 2014

After you do this, your accounts and tax returns will normally cover your company’s financial year from 1 June to 31 May.

You started trading after your company set up

Limited companies can be ‘dormant’ for Corporation Tax between setting up (‘incorporating’) and starting to trade for the first time.

HM Revenue and Customs (HMRC) has detailed guidance on what counts as dormant for Corporation Tax.

You tell HMRC the date that you started to trade when you register for Corporation Tax.

You registered for Corporation Tax before your accounting reference date

You usually:

don’t file a tax return for the period you were dormant

prepare your first tax return to cover the period you were trading

Example

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Register for Corporation Tax | 26 August 2013

Accounting reference date | 31 May 2014

Prepare accounts for 11 May 2013 to 31 May 2014. Then file one tax return for your trading period from 22 July 2013 to 31 May 2014.

You didn’t register for Corporation Tax before your accounting reference date

You must file 2 tax returns - one for the period you were dormant and one for the period you were trading.

Example:

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Accounting reference date | 31 May 2014

Prepare one set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for your dormant period from 11 May to 21 July 2013

second tax return for your trading period from 22 July 2013 to 31 May 2014

second tax return for 11 to 31 May 2014

Overview

When you set up your limited company, you automatically get different reporting dates for the first:

annual accounts you send to Companies House

Company Tax Return you send to HM Revenue and Customs (HMRC)

You may also have to send (‘file’) 2 tax returns to cover your first year in business.

Annual accounts

Your first accounts usually cover more than 12 months. This is because they:

start on the day your company was set up (‘incorporated’)

Company Tax Return

In following years you then normally only file one tax return - and it will usually cover the same financial year as your accounts.

What you must do

The dates of your first tax return - and whether you file 2 or one - depend on whether your company:

started trading on the same day it was set up

didn’t start trading until after it was set up

You started trading the day your company set up

Example

Action | Date

Company set up and started trading | 11 May 2013

First accounting period for Corporation Tax ends | 10 May 2014

Accounting reference date | 31 May 2014

Second accounting period for Corporation Tax ends | 31 May 2014

Prepare your first set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for 11 May 2013 to 10 May 2014

second tax return for 11 to 31 May 2014

After you do this, your accounts and tax returns will normally cover your company’s financial year from 1 June to 31 May.

You started trading after your company set up

Limited companies can be ‘dormant’ for Corporation Tax between setting up (‘incorporating’) and starting to trade for the first time.

HM Revenue and Customs (HMRC) has detailed guidance on what counts as dormant for Corporation Tax.

You tell HMRC the date that you started to trade when you register for Corporation Tax.

You registered for Corporation Tax before your accounting reference date

You usually:

don’t file a tax return for the period you were dormant

prepare your first tax return to cover the period you were trading

Example

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Register for Corporation Tax | 26 August 2013

Accounting reference date | 31 May 2014

Prepare accounts for 11 May 2013 to 31 May 2014. Then file one tax return for your trading period from 22 July 2013 to 31 May 2014.

You didn’t register for Corporation Tax before your accounting reference date

You must file 2 tax returns - one for the period you were dormant and one for the period you were trading.

Example:

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Accounting reference date | 31 May 2014

Prepare one set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for your dormant period from 11 May to 21 July 2013

second tax return for your trading period from 22 July 2013 to 31 May 2014

Example

Overview

When you set up your limited company, you automatically get different reporting dates for the first:

annual accounts you send to Companies House

Company Tax Return you send to HM Revenue and Customs (HMRC)

You may also have to send (‘file’) 2 tax returns to cover your first year in business.

Annual accounts

Your first accounts usually cover more than 12 months. This is because they:

start on the day your company was set up (‘incorporated’)

Company Tax Return

In following years you then normally only file one tax return - and it will usually cover the same financial year as your accounts.

What you must do

The dates of your first tax return - and whether you file 2 or one - depend on whether your company:

started trading on the same day it was set up

didn’t start trading until after it was set up

You started trading the day your company set up

Example

Action | Date

Company set up and started trading | 11 May 2013

First accounting period for Corporation Tax ends | 10 May 2014

Accounting reference date | 31 May 2014

Second accounting period for Corporation Tax ends | 31 May 2014

Prepare your first set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for 11 May 2013 to 10 May 2014

second tax return for 11 to 31 May 2014

After you do this, your accounts and tax returns will normally cover your company’s financial year from 1 June to 31 May.

You started trading after your company set up

Limited companies can be ‘dormant’ for Corporation Tax between setting up (‘incorporating’) and starting to trade for the first time.

HM Revenue and Customs (HMRC) has detailed guidance on what counts as dormant for Corporation Tax.

You tell HMRC the date that you started to trade when you register for Corporation Tax.

You registered for Corporation Tax before your accounting reference date

You usually:

don’t file a tax return for the period you were dormant

prepare your first tax return to cover the period you were trading

Example

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Register for Corporation Tax | 26 August 2013

Accounting reference date | 31 May 2014

Prepare accounts for 11 May 2013 to 31 May 2014. Then file one tax return for your trading period from 22 July 2013 to 31 May 2014.

You didn’t register for Corporation Tax before your accounting reference date

You must file 2 tax returns - one for the period you were dormant and one for the period you were trading.

Example:

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Accounting reference date | 31 May 2014

Prepare one set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for your dormant period from 11 May to 21 July 2013

second tax return for your trading period from 22 July 2013 to 31 May 2014