Writing down allowances give relief each year for a percentage of the balance left in a capital allowances pool: 14% for the main pool and 6% for the special rate pool. The main rate fell from 18% to 14% for chargeable periods beginning on or after 1 April 2026 for companies and 6 April 2026 for income tax, and a period that straddles the change uses a hybrid rate worked out in days.
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How does a writing down allowance work?
Section 56(1) of the Capital Allowances Act 2001 (CAA 2001) sets the allowance as a percentage of the amount by which available qualifying expenditure (AQE) exceeds total disposal receipts (TDR) for the pool. HMRC explains at CA23230 that AQE starts with the pool brought forward, adds qualifying expenditure incurred in the period (other than amounts claimed under a first year allowance) and any first year allowance balance being pooled, and then deducts any AIA claimed; TDR is the total of disposal values for the period. Because the percentage is applied to whatever is left each year, relief is given on a reducing balance and the pool never quite reaches zero while the business keeps it open.
If disposal receipts exceed the pool, section 56(6) gives a balancing charge instead. A business may also claim less than the full allowance under section 56(5), and a smaller claim leaves a larger balance to carry forward. The broader framework is in our guide to capital allowances explained.
HMRC’s own example at CA23230 shows the steps. A partnership has a main pool of £12,000 brought forward at 1 January 2027. In the year to 31 December 2027 it spends £8,000 on new computers, claims AIA on all of it and sells old computers for £3,000. The pool is £12,000 plus £8,000, less £8,000 AIA and £3,000 proceeds, which is £9,000. The writing down allowance is 14% of £9,000, or £1,260, and £7,740 is carried forward.
What are the current rates?
HMRC’s Capital Allowances Manual at CA23220 sets out the rates by chargeable period:
| Pool | Rate | Applies to chargeable periods beginning on or after |
|---|---|---|
| Main pool | 14% | 1 April 2026 (Corporation Tax) or 6 April 2026 (Income Tax) |
| Main pool | 18% | 1 or 6 April 2012 |
| Main pool | 20% | 1 or 6 April 2008 |
| Special rate pool | 6% | 1 or 6 April 2019 |
| Special rate pool | 8% | 1 or 6 April 2012 |
| Special rate pool | 10% | 1 or 6 April 2008 |
The special rate of 6% is in section 104D and applies even when special rate expenditure is in a single asset pool. HMRC’s policy paper on the 2026 change confirms that the special rate pool was not altered. Ring fence oil and gas trades have their own rates, 25% and 10%, which are outside the scope of this page.
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Which assets go in which pool?
Gov.uk explains that most plant and machinery goes into the main pool unless it belongs in the special rate pool or a single asset pool. The special rate pool takes integral features, long life assets, solar panels, thermal insulation added to a building and cars above the emissions threshold. Long life assets only go in it where the total spent on them in the period is over £100,000, scaled for periods longer or shorter than 12 months; in a partnership with a company member all long life costs are special rate. The boundaries are explained in integral features and the special rate pool.
Single asset pools hold short life assets, which take the main rate, and assets a sole trader or partner also uses privately, where the allowance is reduced for the private use. See short life asset elections for when a separate pool helps.
Why did the main rate fall to 14%?
Finance Act 2026 section 28 substituted 14% for 18% in section 56(1). HMRC’s policy paper says the cut was introduced alongside a new 40% first year allowance, and that most new investment now gets upfront relief through the £1 million annual investment allowance or full expensing. The paper says the cut affects businesses with pools of older main rate expenditure and spending that does not get, or is not claimed under, a first year allowance or the AIA. For new main rate plant that cannot be fully relieved upfront, the 40% first year allowance may soften the effect.
How is the hybrid rate worked out?
Section 28(3) to (6) of Finance Act 2026 applies to a chargeable period that begins before the relevant day and ends on or after it. The relevant day is 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax. The rate for that period is:
X = (18 x BRD/CP) + (14 x ARD/CP)
BRD is the number of days in the period before the relevant day, ARD the number of days on and after it, and CP the total days in the period. If X has more than two decimal places it is rounded up, not to the nearest figure, to the second decimal place. CA23222 stresses that the apportionment must be in days. Gov.uk also links to an HMRC calculator for the hybrid rate.
HMRC’s example at CA23222 takes a company with a year from 1 January 2026 to 31 December 2026. It has 90 days before 1 April 2026 and 275 days on and after, giving a hybrid rate of 14.99%. On a main pool of £10,000 with no additions, the maximum allowance is £1,499.
Illustration only. A sole trader’s year runs from 1 July 2025 to 30 June 2026. There are 279 days before 6 April 2026 and 86 on and after it, out of 365. X is (18 x 279/365) + (14 x 86/365), which is 17.0575 before rounding, so the rate is 17.06%. On a main pool of £80,000 the allowance is £13,648.
How do short periods and small pools change the figure?
Under section 56(3), if the chargeable period is more or less than a year the allowance is increased or reduced in proportion, and under section 56(4) it is reduced if the activity was carried on for only part of the period. A company’s first nine month period, for example, gets nine twelfths of the annual figure. Our guides to short accounting periods and long periods of account deal with the wider consequences.
Section 56A lets the main pool or special rate pool be written off in full where the balance, after disposals, is £1,000 or less, again scaled for the period length. CA23225 says it does not apply to single asset pools and that a pool of £1,100 cannot use it: the business claims 14%, or £154, carries forward £946, and can then claim that £946 the following year if nothing else changes.
Where do first year allowance balances fit in?
Where a 40% or 50% first year allowance is claimed, CA23110 says the unrelieved part of the cost cannot join the pool in the same period. It goes in the following period or a later one, and at the latest in the period of disposal. Writing down allowances on that balance therefore start a year later. Items relieved in full by the AIA or full expensing are recorded in the pool at zero, which gov.uk says helps work out any tax when they are sold.
What mistakes come up most often?
- Using 14% for a whole period that began before 1 April 2026 or 6 April 2026, instead of the hybrid rate.
- Apportioning by months rather than days, or rounding the hybrid rate to the nearest figure rather than up.
- Applying a hybrid rate to the special rate pool, which stayed at 6% throughout.
- Using the Corporation Tax date for a sole trader or partnership, or the other way round.
- Forgetting to scale the allowance and the £1,000 small pool limit for a short or long period.
- Adding the unrelieved balance of a 40% or 50% first year allowance to the pool in the year of purchase.
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Related Accountapedia entries
- How the Annual Investment Allowance is calculated
- The 50% first year allowance for special rate assets
- Balancing charges and balancing allowances
- Selling assets after full expensing
- Should you claim less than full capital allowances
Sources
- legislation.gov.uk: Act 2001 c. 2, section 56
- GOV.UK: Manual page CA23220
- legislation.gov.uk: Act 2001 c. 2, section 104D
- GOV.UK: Capital allowances new first year allowance and reducing main rate wri
- legislation.gov.uk: Act 2026 c. 11, section 28
- GOV.UK: Manual page CA23222
- GOV.UK: Rates and pools
- GOV.UK: Manual page CA23230
- legislation.gov.uk: Act 2001 c. 2, section 56A
- GOV.UK: Manual page CA23225
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.