← Glossary Business glossary
What is Depreciation?
Spreading the cost of something you own across the years you actually use it.
A £1,200 laptop used for three years is not really a £1,200 cost in month one. Depreciation spreads that cost across its useful life, so your accounts show what each year genuinely cost to run.
Worth keeping separate in your head from capital allowances. Depreciation is an accounting idea; capital allowances are the tax rules, and they are calculated differently. HMRC does not accept your depreciation figure in place of them.
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