How does the writing down allowance work for capital allowances?

Full answer

**What is writing down allowance?** Writing down allowance (WDA) is the mechanism by which businesses claim capital allowances on plant and machinery that does not qualify for the 100% Annual Investment Allowance (AIA) or first-year allowances. It reduces the pool value each year on a declining-balance basis. **The two main pools** | Pool | WDA rate | Typical assets | |---|---|---| | Main pool | 18% per year | Most plant, machinery, vehicles, IT equipment | | Special rate pool | 6% per year | Integral building features (lifts, heating), long-life assets, solar panels | **How the declining balance works** WDA is applied to the pool balance at the start of the period, not the original cost. This means the allowance gets smaller each year. **Example: David's main pool** David runs a limited company. After using AIA on his main purchases, he has a main pool balance of £50,000. - Year 1: WDA = 18% × £50,000 = £9,000; pool balance = £41,000 - Year 2: WDA = 18% × £41,000 = £7,380; pool balance = £33,620 - Year 3: WDA = 18% × £33,620 = £6,052; pool balance = £27,568 At 30% corporation tax, the year 1 tax saving is £9,000 × 25% = £2,250 (at main rate; small companies rate may differ). **Annual Investment Allowance priority** Most businesses should first use AIA (£1,000,000 per year for 2026/27) to claim 100% of qualifying expenditure immediately. WDA applies to any excess, and to the opening pool balance from prior years. **Small pool write-off** If the pool balance falls below £1,000, you can claim the full remaining balance as a write-off in that year rather than continuing to apply WDA. **Short-life assets** Assets with an expected life of up to eight years can be placed in a separate single-asset pool. This means when the asset is sold or scrapped, any remaining balance is written off immediately rather than remaining in the general pool. **Special rate pool timing** At 6% WDA, special rate assets take much longer to be relieved. A £100,000 special rate asset still has a £54,000 pool balance after 10 years — this is why AIA prioritisation matters.

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