A guide to capital allowances for commercial property

What are capital allowances?

Capital allowances allow businesses to deduct the cost of certain assets from their taxable profits, reducing the amount of tax they pay. Rather than claiming the full cost in one year, allowances are typically spread over time, effectively recognising that assets depreciate and lose value.

They apply to what HMRC calls plant and machinery: equipment, machinery, and business vehicles used in the course of running a business. In the context of commercial property, this can include a wide range of fixed assets.

What counts as plant and machinery in a commercial property?

Capital allowances cannot be claimed on the commercial building itself. However, they can be claimed on qualifying fixed contents, and the list is broader than many business owners expect.

Assets that may qualify include:

• Heating and air conditioning systems
• Electrical systems and lighting
• Lifts and escalators
• Sanitary fittings and plumbing
• Office furniture and fitted equipment
• Computers and IT infrastructure
• Machinery, lathes, and production equipment
• Shop fittings and display systems

If you are uncertain whether a specific asset qualifies, the right starting point is a conversation with a qualified adviser and to not make any assumptions.

What are the main types of capital allowance?

There are several forms of capital allowance relevant to commercial property owners and buyers. The table below summarises the key types, current rates, and what they apply to:

Rates and limits correct as of March 2026. Capital allowances rules are subject to change. Always verify current figures at gov.uk/capital-allowances or take advice from a qualified tax adviser.

Annual investment allowance (AIA)

AIA allows you to deduct 100% of the cost of qualifying plant and machinery from your profits in the year of purchase, up to the government-set annual limit. It is one of the most tax-efficient reliefs available and applies to most qualifying assets with the exception of cars and a small number of exclusions.

You cannot claim AIA on items you have previously owned and then moved to your business premises, assets that are leased rather than purchased, or items used for business entertainment. Certain structural elements, including mains water and gas supplies, bridges, roads, and docks, are also excluded.

Writing down allowance (WDA)

If your qualifying expenditure exceeds the AIA limit, or you are claiming for assets that do not fall under AIA, writing down allowance allows you to claim tax relief on a proportion of the asset's value each year. Assets are grouped into pools based on their expected useful life, with different rates applying to each pool.

From April 2026, the main rate WDA reduces from 18% to 14%. This is worth factoring into investment timing decisions, particularly for businesses with significant existing asset pools or planned capital expenditure that does not qualify for faster reliefs.

Full expensing and first-year allowances

Where businesses invest in new qualifying plant and machinery, full expensing allows companies to claim 100% relief in the year of purchase with no upper limit. A new 40% first-year allowance, introduced from January 2026, extends accelerated relief to unincorporated businesses and leasing assets for the first time.

Additional first-year reliefs are available on zero-emission cars and electric vehicle charging infrastructure. The rules in this area have evolved in recent years, so it is worth verifying current eligibility with HMRC or a specialist adviser.

What do buyers need to check before purchasing a commercial property?

For buyers, capital allowances introduce an important due diligence step that is easy to overlook, but can have a real impact on the deal.

Since 2014, HMRC rules have required buyers and sellers to agree on how capital allowances are allocated as part of the transaction. If a seller has previously claimed allowances on assets within the property, a buyer's ability to claim on those same assets may be restricted or eliminated entirely. Getting this wrong can mean losing tax relief permanently.

Before completing a purchase, buyers should:

• Establish whether the seller has previously claimed capital allowances on the property's plant and machinery
• Request the vendor's tax records and relevant expenditure notes as part of due diligence
• Consider whether the allocation of allowances should be reflected in the agreed purchase price
• Take advice before heads of terms are finalised, not after

Where a seller has not claimed allowances, or where a joint election can be agreed, there may be an opportunity to maximise the relief available to the buyer. In some cases, the absence of a properly structured capital allowances position is a legitimate basis for negotiating an adjustment to the sale price.

What should existing property owners consider?

If you already own a commercial property, it is worth reviewing whether all qualifying assets have been identified and claimed. Capital allowances have to be actively claimed, as they are not applied automatically, and in many cases they have not been. This is usually because the process appears complex, records are incomplete, or the entitlement simply was not known.

A retrospective review of unclaimed allowances can sometimes unlock meaningful tax relief. The appropriate starting point is a review with a qualified tax adviser or surveyor who can assess what was installed, when, and whether any previous claims have been made.

How BTG Eddisons can help

BTG Eddisons works with property buyers, owners, and professional intermediaries across the full commercial property lifecycle. Our team can provide guidance on commercial acquisitions, asset sales, and valuations, and help you understand where specialist tax advice should form part of your transaction process.

Please complete the form below to discuss your capital allowances with one of our expert team members.

This article is intended as general guidance only and does not constitute tax advice. We recommend consulting a qualified tax adviser or accountant for advice specific to your circumstances.