Capital allowances on assets brought into a business

Q: What mistakes do people make?

Claiming AIA or full expensing on introduced assets. Sections 38B and 46 rule this out. Using the original price when market value is lower. Market value is the starting point; cost is only a ceiling. Ignoring private use. A van or laptop used at weekends needs a single asset pool and a restricted claim. Mixing methods for vehicles. GOV.UK says simplified mileage expenses cannot be claimed if you have already claimed for the vehicle in another way; see mileage allowance for the alternative. Forgetting the disposal. When the asset is sold or taken back for private use, a disposal value is needed and a balancing charge or allowance may arise. Treating cars like vans. Cars go into the main or special rate pool depending on emissions; see capital allowances on cars.

When you start using something you already own in your business, such as a laptop, a set of tools or a van, section 13 of the Capital Allowances Act 2001 treats you as buying it on the day it is brought into business use, for its market value on that day (or its original cost if that is lower). You cannot claim the annual investment allowance or any first year allowance on that value, so relief comes through writing down allowances, reduced for any private use.

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What does the law actually say about assets I already own?

Section 13 of the Capital Allowances Act 2001 (CAA 2001) applies where a person brings plant or machinery into use for a qualifying activity, such as a trade or profession, and on that date already owns it because they bought it for some other purpose. The person is treated as incurring notional capital expenditure on the date the asset is first used in the business, and as owning it because of that expenditure.

The amount of the notional expenditure is the market value of the asset on that date. There is one cap: if the market value is more than what you originally paid, the figure is limited to your original cost. HMRC summarises the rule at CA23030 of its Capital Allowances Manual. Its consumer guidance puts it simply: use the market value, meaning the amount you would expect to sell the item for, if you owned it before you started using it in your business or if it was a gift.

Gifts have their own section. Under section 14, plant or machinery you received as a gift and then bring into business use is treated as bought for its market value on the date it is first used for the business (CA23040).

How is this different from things I bought just before starting?

The distinction is about purpose at the time of purchase. Section 13 covers assets bought for private or other purposes and later moved into the business. Equipment bought for a business you are about to start is different: section 12 treats expenditure incurred by a person about to carry on a qualifying activity as incurred on the first day the activity is carried on. HMRC’s example at CA23020 is a hearse bought three months before an undertaking business opened, treated as bought on the opening day.

That difference has real consequences. A pre trading purchase is actual expenditure at its actual cost and can qualify for the annual investment allowance. An asset that started life as a personal possession comes in at market value and cannot.

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Why can’t I claim the annual investment allowance on these assets?

Section 38B of CAA 2001 lists general exclusions from the annual investment allowance (AIA). General exclusion 5 applies to expenditure treated as incurred under section 13, section 13A or section 14. The same three sections appear in general exclusion 8 of section 46, which blocks every first year allowance, including full expensing under section 45S and the 40% allowance under section 45U. GOV.UK confirms that you cannot claim AIA on items you owned for another reason before you started using them in your business, or on items given to you, and tells you to claim writing down allowances instead.

The market value therefore goes into a pool. For most equipment and vans that is the main pool, where the writing down allowance is 14% a year for chargeable periods from 1 April 2026 (companies) and 6 April 2026 (income tax), having been 18% before. Special rate assets attract 6%. If the main pool balance is £1,000 or less, section 56A lets you claim the whole balance as a small pool allowance. For the wider picture see capital allowances explained.

How do I work out market value?

Market value is what the item would fetch if sold on the open market on the day it is first used in the business, not what you paid for it or what a new one would cost. In practice that means:

for computers, phones and tools, prices for the same model and condition on second hand marketplaces or dealer sites at that date;
for vans, trade guide prices or dealer valuations for the same age, mileage and condition;
for specialist equipment, a written valuation if the figure is significant.

Keep a copy of the evidence with the date. If you still have the original receipt, keep it too, because section 13(4) caps the figure at cost when market value is higher.

What if I still use the asset privately?

Sole traders and partners who use an asset partly outside the business must keep it in a single asset pool under section 206. Section 207 then requires each writing down allowance, balancing allowance and balancing charge to be reduced to an amount that is just and reasonable, having regard to private use. The full allowance is still deducted from the pool balance carried forward, so the private share is simply lost.

HMRC’s example at CA27005 involves a van bought some years earlier for private use and introduced into a business at a market value of £40,000. The writing down allowance is restricted each year to the business percentage, and when the van is later sold the balancing charge is restricted by the average business use over the years of ownership. The same example notes that AIA is not available because the asset falls within the general exclusions.

Companies work differently. Where a company provides an asset for a director’s or employee’s private use as part of a remuneration package, so that a benefit charge arises, HMRC accepts at CA27100 that the expenditure is incurred wholly for the qualifying activity, and a claim on machinery such as a car should normally be accepted.

Can you show a worked example?

Illustration only. Sam starts a self employed electrical business on 1 May 2026 and prepares accounts to 30 April 2027 on the accruals basis. Sam brings in:

Asset	Original cost	Market value at 1 May 2026	Business use
Laptop	£1,200	£500	100%
Van	£18,000	£11,000	80%

The laptop enters the main pool at £500, its market value. That is under the £1,000 small pool limit, so Sam can claim the whole £500.
The van has private use, so it sits in its own single asset pool at £11,000. The writing down allowance at 14% is £1,540, restricted to 80%, giving a claim of £1,232.
The balance carried forward on the van pool is £9,460, because the full £1,540 is deducted even though only £1,232 was claimed.

No AIA is available on either item, even though Sam’s total is far below the AIA limit. If Sam uses the cash basis instead, GOV.UK states that sole traders and partnerships on the cash basis can only claim capital allowances on business cars, so this computation would not apply.

What happens if I move a personal asset into my own company?

A company is a separate person, so a director who sells or gives a personal asset to the company is making a transaction with it rather than bringing the asset into use personally. If the director controls the company they are connected with it under section 575. For a sale between connected persons, section 217 denies the AIA and first year allowances on the buyer’s expenditure, and section 218 limits the buyer’s qualifying expenditure. Where the seller does not bring a disposal value into account, which is usual for a purely personal asset, the limit is the smallest of the market value, the seller’s original cost and the cost to anyone connected with the seller. Section 213(3) applies the same treatment where the director gives the asset to the company.

So whether you are a sole trader or a company owner, a used personal asset usually produces writing down allowances on no more than its market value. For transfers of a whole business into a company see incorporation relief.

What mistakes do people make?

Claiming AIA or full expensing on introduced assets. Sections 38B and 46 rule this out.
Using the original price when market value is lower. Market value is the starting point; cost is only a ceiling.
Ignoring private use. A van or laptop used at weekends needs a single asset pool and a restricted claim.
Mixing methods for vehicles. GOV.UK says simplified mileage expenses cannot be claimed if you have already claimed for the vehicle in another way; see mileage allowance for the alternative.
Forgetting the disposal. When the asset is sold or taken back for private use, a disposal value is needed and a balancing charge or allowance may arise.
Treating cars like vans. Cars go into the main or special rate pool depending on emissions; see capital allowances on cars.

What records should I keep?

Record the date each asset was first used in the business, the valuation evidence used for market value, the original purchase receipt where available, and a note of how the business use percentage was estimated, such as a mileage log for a vehicle. If HMRC opens an enquiry, these are the items an officer is likely to ask about, and a dated valuation made at the time is far easier to defend than one reconstructed years later. If you are unsure whether an item is plant at all, see what counts as plant and machinery.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.