Can I claim capital allowances as a sole trader?
Answered 11 March 2026
Yes, as a sole trader you can claim capital allowances. Here is a summary of the key rules:
What the law says
The general rule under CAA 2001 s.11 is that expenditure on plant and machinery qualifies for capital allowances if it is capital expenditure on the provision of plant and machinery, incurred for the purposes of a qualifying activity (which includes a trade), and the person incurring the expenditure owns the plant and machinery as a result of incurring it.
In income tax cases (which applies to sole traders), capital allowances are made in calculating income for the chargeable period — they are deducted as if they were an expense of the business, and balancing charges are added back in the same way as depreciation is added back.
HMRC guidance / practice
There are three main types of Plant and Machinery Allowances (PMAs) available:
- Annual Investment Allowance (AIA) – a 100% allowance available in the year expenditure is incurred, up to an annual threshold of £1 million (since 1 January 2019).
- First-Year Allowances (FYAs) – available on certain qualifying expenditure.
- Writing-Down Allowances (WDAs) – available on the reducing balance of pooled expenditure.
The AIA is available to businesses regardless of their size or legal form (so it applies equally to sole traders as to companies or partnerships), and covers almost all plant or machinery apart from cars.
Where expenditure qualifies for more than one type of allowance, it is up to the person to choose which allowance to claim.
Note: If you use the cash basis for calculating your trading profits, the interaction with capital allowances is subject to specific adjustment rules under ITTOIA 2005 Chapter 17A.
Citation sources
There are three main types of Plant and Machinery Allowances (PMAs): Annual Investment Allowance (AIA), First-Year Allowances (FYAs) and Writing-Down Allowances (WDAs). Where the expenditure qualifies for more than one type of PMA, it is up to the person to choose which of the available allowances they will claim (CA20008). It is likely that most employees who claim PMAs will choose to claim the AIA. The AIA is a 100% allowance which is available in the year in which the expenditure is incurred
Capital allowances are made for a chargeable period CA11510. The amount of WDA for a chargeable period depends upon the length of that period. For example, if the annual rate of WDA is 18% the rate of WDA for a chargeable period that is 6 months long is 6/12 x 18% = 9%. Similarly, Annual Investment Allowance must be proportionately increased or reduced when a chargeable period is more or less than a year. For example, if a chargeable period is 6 months long, in a year in which the AIA is set at
ed for the purposes of a “qualifying activity”, which includes a trade. Allowances are generally given on a “pooled” basis, so a taxpayer incurring expenditure to acquire plant and machinery increases the pool of expenditure qualifying for allowances. Allowances are made as a percentage of the balance available in the pool, the pool being reduced by the amount of the allowances given (known as the reducing balance basis). A taxpayer selling plant and machinery that has qualified for allowances i
Part 2 Trading income Chapter 17A Cash basis: adjustments for capital allowances Adjustments on entering cash basis Assets not fully paid for 240D 1 This section applies if— a a person carrying on a trade enters the cash basis for a tax year, b at any time before the beginning of ... that tax year the person has incurred relevant expenditure, and c not all of the relevant expenditure has actually been paid by the person. 1A “ Relevant expenditure ” means expenditure— a for which a deduction woul
The AIA is effectively a 100% first-year allowance for business expenditure on almost all plant or machinery (apart from cars) capped at a maximum allowance. It is available to businesses regardless of their size or legal form. The current and past AIA maximums and the date ranges for which they apply can be found on ‘Claim capital allowances - Annual investment allowance’, gov.uk.