What is Capital allowances?
How you claim tax relief on equipment you buy and keep, rather than as an ordinary expense.
Things you buy and keep (a laptop, a camera, machinery, a van) are capital, not day-to-day running costs, so they go through capital allowances instead of sitting in your expenses total.
The Annual Investment Allowance lets you claim the full cost of most plant and machinery in the year you buy it, up to £1 million a year. That limit is far above anything a typical sole trader will spend, so in practice most small purchases are fully claimable straight away.
Cars are the notable exception and are handled separately. And under cash basis accounting the picture flips: most equipment is simply claimed as an ordinary expense, with cars still going through capital allowances.
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