Can employees claim capital allowances on equipment

Q: What mistakes come up most often?

Claiming for a car or van. It cannot qualify; use mileage allowance relief. Claiming when the employer offered the item. Preferring your own laptop to the one provided defeats the claim. Claiming when the employer paid. EIM36520 says an employee whose employer meets the cost, directly or indirectly, will not usually be eligible. Ignoring private use when claiming the full cost. Forgetting the balancing charge when keeping the item after leaving. If HMRC opens a check into your return, tax investigation insurance pays your accountant's fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

An employee can claim capital allowances on equipment they buy for their job, but only if the job objectively requires it and the employer would not otherwise provide it. Section 36 of the Capital Allowances Act 2001 adds that cars, vans, motorcycles and bicycles never qualify, because employees get relief for their own vehicles through mileage allowance relief instead. Where a claim is valid, the annual investment allowance usually gives relief on the full business share of the cost in the year of purchase.

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Can an employee really claim capital allowances?

Yes. Section 15(1)(i) of the Capital Allowances Act 2001 lists an employment or office as a qualifying activity, alongside trades and property businesses. Under section 262 the allowance is given as a deduction from the taxable earnings of the employment, and any balancing charge is taxed as earnings (EIM36850). For an employee, the chargeable period is the tax year (section 6(2)(b)).

HMRC’s Employment Income Manual at EIM36520 says the plant and machinery rules apply to employments in the same way as to trades, subject to two extra conditions that only apply to employees and office holders. Those two conditions are where most claims fail. The general framework is covered in capital allowances explained.

What does “necessarily provided” mean?

Section 36(1)(b) says expenditure only qualifies if the plant or machinery is necessarily provided for use in the performance of the duties. HMRC explains at EIM36540 that this is the same objective test as the general rule for employees’ expenses in section 336 of the Income Tax (Earnings and Pensions) Act 2003. Items bought for the employee’s own convenience, or for personal reasons, do not qualify even if they are in fact used at work.

The leading case is White v Higginbottom, where a vicar’s slide projector for illustrated sermons was refused because another vicar could perform the same ministry without it (EIM36550). Two questions decide most claims:

Do the duties themselves require the item? Choosing a particular way of working is not enough, though HMRC accepts some choice where duties are loosely defined and the equipment is a more modern way of doing an essential task.
Would the employer provide it? If the employer is willing to provide or pay for the item, the employee has not necessarily provided it (EIM36540). HMRC expects a substantial requirement to appear in the contract of employment, and will ask whether the employee approached the employer and what other staff in similar roles do (EIM36560).

The asset does not have to be used wholly and exclusively for work. Private use reduces the allowance rather than ruling it out (EIM36540).

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What about laptops and computers?

EIM36730 says most employees will not pass the test for computers, because even where a computer is essential, the employer usually supplies one, and it is not enough to argue that the employer’s equipment is inadequate. HMRC will normally accept a claim where all of these apply:

the job is paid entirely or largely by results
the objective, such as selling insurance, is clear but the method of achieving it is not prescribed
the employee must bear the cost of equipment used to achieve it, because the employer will not provide or pay for it

Where the employer does provide equipment for home working, the employee’s position is covered in equipment provided for home working.

Why are cars and vans excluded?

Section 36(1)(a) says expenditure on a mechanically propelled road vehicle, or a cycle, is not qualifying expenditure where the qualifying activity is an employment. HMRC confirms at EIM36750 that this covers cars, motorcycles and vans, and that the only way an employee can get relief for using their own vehicle for work is mileage allowance relief. Booklet 480 notes that employees have not been able to claim capital allowances on a car, motorcycle or cycle since 2002 to 2003.

The reason is that mileage allowance relief is a complete scheme for the cost of business travel in the employee’s own vehicle. EIM31335 says it is the only relief available for those costs: nothing more, such as capital allowances, actual expenditure, insurance, repairs or loan interest relief, is given however much the employee actually spends. For 2026 to 2027 the approved rates are 55p a mile for the first 10,000 business miles in a car and 25p after that, 24p for a motorcycle and 20p for a cycle. If the employer pays less, the employee claims relief on the shortfall; see mileage allowance payments. The exclusion also blocks relief for interest on a loan to buy a vehicle (EIM36900).

A self employed person is in a different position; see capital allowances on cars.

Which allowance can be claimed, and how much?

EIM36615 says most employees who qualify will choose the annual investment allowance, a 100% allowance in the year of purchase, available up to £1 million a year under section 51A of the 2001 Act. Any cost not covered by an allowance goes into a pool for writing down allowances in later years. See the annual investment allowance.

Where the asset is also used privately, sections 205 and 207 require the allowance to be reduced to a just and reasonable amount, based mainly on actual use in the tax year (EIM36570). HMRC’s own example at EIM36925 is a salesman who must buy a £3,000 laptop on starting a job and uses it 80% for work: he claims an annual investment allowance of £2,400.

For very cheap items, such as small tools or a basic calculator, EIM36510 says HMRC has no objection to a straightforward deduction under section 336 instead, if the item is necessarily provided and used solely in the duties. Many trades also have flat rate expenses for tools and clothing.

What happens on leaving the job or selling the item?

A balancing adjustment arises when the employment ends or the asset is sold or given away. In HMRC’s example at EIM36930, the salesman leaves and keeps the laptop, now worth £1,500. Having claimed the full cost, he has a balancing charge of £1,500, taxed as employment income. Had he restricted his claim to 80%, the charge would be £1,200.

If an employee’s allowances exceed the earnings from the employment, section 128 of the Income Tax Act 2007 allows the excess to be set against other income, though HMRC describes such claims as very exceptional (EIM36890).

How is the claim made?

Strictly, capital allowances must be claimed in a Self Assessment return. EIM36870 explains that HMRC will also accept a claim by letter or on form P87 from an employee who does not get a return, provided it is made while the employee could still ask for a return for that year, which runs to three years after 31 October following the tax year. A claim for 2026 to 2027 can therefore be made until 31 October 2030. See claiming employment expenses.

If the employee borrowed to buy qualifying equipment, section 390 of the Income Tax Act 2007 can give relief for the loan interest, restricted for private use (EIM36900).

What mistakes come up most often?

Claiming for a car or van. It cannot qualify; use mileage allowance relief.
Claiming when the employer offered the item. Preferring your own laptop to the one provided defeats the claim.
Claiming when the employer paid. EIM36520 says an employee whose employer meets the cost, directly or indirectly, will not usually be eligible.
Ignoring private use when claiming the full cost.
Forgetting the balancing charge when keeping the item after leaving.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.