AIA Capital Allowances: What Qualifies and How to Claim

What Qualifies for AIA

The Annual Investment Allowance (AIA) is a 100% capital allowance on qualifying plant and machinery, capped at £1,000,000 per 12-month period. The £1m cap is permanent.^[1] This page covers the claiming mechanics: what qualifies, the traps, and how the claim actually goes on the return. If you want the decision side instead (what the AIA is, and whether AIA, full expensing, the 40% first-year allowance or a writing down allowance is the right relief for a purchase), that lives in our companion guide, annual investment allowance explained.

HMRC defines plant and machinery broadly.^[2] Qualifying spend includes:

• Office equipment: desks, chairs, computers, servers, printers
• Tools and machinery: drills, lathes, CNC routers, industrial ovens, printing presses
• Commercial vehicles: vans, lorries, tractors, diggers (but never cars)
• Fixtures: commercial kitchen equipment, warehouse shelving, air conditioning units
• Integral features of a building: electrical systems, lighting, heating, hot and cold water, lifts
• Bicycles and e-cargo bikes bought for business use
• Building alterations needed to install plant (but not the building fabric itself)

Three examples from client work. A Newcastle joinery workshop bought a CNC router for £38,000: full AIA claim in year one. A Cardiff café spent £22,000 on an espresso machine and refrigeration: all covered. A Nottingham IT consultancy bought £14,000 of laptops and monitors: claimed in full.

What Does NOT Qualify

• Cars (see the vehicles section below)
• Buildings, structures and land (the fabric of a building is not plant; construction costs may get the 3% Structures and Buildings Allowance instead)
• Assets you owned personally before the business started or before you introduced them to it (no AIA; they enter the pool at market value for writing down allowances)
• Assets given to you (you can only claim on what you actually spent)
• Assets bought from a connected person
• Assets you lease rather than own (the lessor claims the allowances)

Vans, Cars and Other Vehicles: the AIA Dividing Line

Vehicles generate more AIA questions than anything else. The line is simple to state: vans and commercial vehicles qualify for AIA; cars never do.^[3]

A Ford Transit at £35,000 gets a full AIA claim. So does a lorry, a tipper, a minibus of a type not commonly used as a private vehicle, or a crew van whose construction is primarily for carrying goods. A construction company's van belongs in the AIA claim, not the main pool, unless you deliberately choose otherwise.

Cars are excluded whatever their emissions. A car goes through writing down allowances instead: main pool at 14% for periods beginning from April 2026 (18% before) for cars at 50g/km CO2 or less, special rate pool at 6% above that, and a separate 100% first-year allowance for new zero-emission cars only. The rates and bands are covered in our writing down allowance rates guide.

Double cab pickups used to sit in a grey area, but HMRC settled it: for expenditure from 1 April 2025 (corporation tax) or 6 April 2025 (income tax), a double cab pickup is treated as a car for capital allowances whatever its payload, so no AIA and no full expensing (HMRC CA23511). Transitional van treatment survives only for contracts entered into before April 2025 with the expenditure incurred by 1 October 2025. The old one-tonne payload test still matters, but for VAT recovery only, not capital allowances. Buying on finance does not change the analysis: under hire purchase you claim AIA on the capital cost once the asset is brought into use, and the monthly interest is a separate revenue deduction, but you do not deduct the repayments themselves as well as claiming AIA. More detail in our capital allowances on vans guide.

Second-Hand Assets, Connected Persons and Assets You Already Own

Second-hand plant and machinery qualifies for AIA at the same 100% rate as new. It does not matter that a previous owner claimed AIA (or any other allowance) on the same asset: their disposal brought a balancing adjustment into their computation, and your purchase is fresh qualifying expenditure in yours.

Two genuine restrictions:

• Connected persons. Buying from a relative, or from a company you (or a connected person) control, is excluded from AIA. The asset still gets writing down allowances, but not the 100% claim. The rule exists to stop assets being traded within a family or group purely to manufacture allowances.
• Assets bought under a personal name or already owned. An asset you owned personally before the business used it (a laptop, a van, tools) was not bought for the business, so no AIA. It enters the pool at market value on the date of introduction and gets writing down allowances only. Buying an asset in your own name for a company you run raises the same problem: the claimant must be the person carrying on the qualifying activity that incurred the expenditure, so route business purchases through the business.

Note the second-hand exclusion that does NOT apply here: full expensing and the 40% first-year allowance are new-and-unused only, but AIA takes second-hand assets happily. That makes AIA the main upfront relief for used kit.

Sole Traders and Partnerships: AIA on the SA Return

AIA is not a company-only relief. Sole traders and partnerships claim it on the same terms and against the same £1m cap, through the self assessment return rather than the CT600. One structural exclusion: a partnership with a corporate partner (a company as one of the partners) cannot claim AIA at all. Ordinary partnerships of individuals can.

For a sole trader the claim goes in the capital allowances boxes of the SA103 self-employment pages; for a partnership, on the SA800 partnership return, with each partner then taking their profit share after allowances. Private use of the asset restricts the claim (next section but one). Our sole trader capital allowances guide covers the unincorporated treatment end to end, including simplified expenses interactions.

The £1m Limit: Groups, Associated Companies, Short Periods and History

The cap is £1,000,000 of qualifying expenditure per 12-month accounting period, per business, with two big qualifications.

Companies under common control share one limit. A group of companies gets one £1m AIA between all members. Companies under common control that are related (broadly: sharing premises, or carrying on similar activities) also share a single £1m, split between them in whatever proportion they choose.^[2] Worked split: two related companies under one owner spend £700,000 and £500,000 on qualifying plant in the same year. Total spend £1,200,000, but total AIA available is £1,000,000. They might allocate £700,000 to the first and £300,000 to the second; the second company's remaining £200,000 falls into its main pool for writing down allowances.

Short periods scale the cap. The limit is time-apportioned. A company preparing accounts for an 8-month period has an AIA cap of £1,000,000 x 8/12 = £666,667. A 6-month period gives £500,000. Because the £1m cap is permanent there is no longer any straddling-the-cap-change arithmetic to do: whatever your period, the cap is £1m scaled to its length.

The history, for old computations. The cap was £200,000 up to 31 December 2018, rose to £1m from 1 January 2019 as a temporary measure, and was made permanent from April 2023. If you are reviewing a 2018 or 2019 computation, the straddle rules of that era applied a time-apportioned hybrid cap; anything current is simply £1m.

Timing: When Expenditure Is Incurred

You claim AIA in the period the expenditure is incurred, which for capital allowances generally means when the obligation to pay becomes unconditional, normally on delivery, not when the invoice is dated or paid.^[2] An asset delivered on 28 March under a period ending 31 March belongs in that period even if you pay in April.

Under hire purchase, you claim AIA on the full capital cost once the asset is brought into use, even though you are still paying instalments. Under a finance lease you generally cannot claim AIA because you do not own the asset. Near a year end, one day's difference in delivery moves the claim a whole period, and changes which year's £1m cap it consumes, so time large purchases deliberately.

Private Use: Apportioning the Claim

A sole trader or partner using an asset partly privately claims AIA on the business proportion only. A Bristol-based sole trader buys a laptop for £2,400 and uses it 75% for business: the AIA claim is £2,400 x 75% = £1,800. The asset sits in a single asset pool so the private restriction carries through to any later disposal. Keep a defensible basis for the percentage (a usage log if challenged). Company-owned assets used privately by a director are handled through benefit-in-kind rules instead, not by restricting the company's AIA.

How to Claim AIA on the CT600 and Self Assessment

There is no separate AIA form. The claim sits inside the capital allowances computation that accompanies the return:

• Limited company: capital allowances section of the CT600, supported by the computation. Amend within 12 months of the filing deadline if you missed a claim.
• Sole trader: the capital allowances boxes on the SA103 self-employment pages; amendments within 12 months of the 31 January filing deadline.
• Partnership: the SA800 partnership return; allowances are claimed at partnership level before profits are shared.

AIA is a claim, not a default. You can claim the full cost, part of it, or none: whatever you do not claim falls into the appropriate pool for writing down allowances. Partial claims are a real tool, not an error; when deliberately claiming less than the maximum makes sense is a planning question covered in annual investment allowance explained. Keep invoices, delivery notes and proof of payment: HMRC can ask for them in a compliance check, and the record-keeping obligation runs for at least 5 years after the filing deadline (6 years from the period end for companies).

Selling an Asset After an AIA Claim

An AIA claim writes the asset's tax value down to nil, so the disposal proceeds come straight back into the computation. You deduct the proceeds (capped at original cost) from the relevant pool balance; if that pushes the pool negative, the negative amount is a balancing charge added to taxable profits.

Worked example. A courier claimed AIA on a £38,000 van and has nothing else in the main pool. Three years later the van sells for £11,000. The pool is nil, so deducting £11,000 creates a balancing charge of £11,000, taxed in full in the year of sale. Selling at a "massive loss" against the original price does not create extra relief: the AIA already relieved the entire £38,000, so any proceeds at all claw some of it back. Sales to connected persons (a company van sold cheaply to its director) are substituted at market value. The pool mechanics, including balancing allowances where a pool balance survives, are in our writing down allowance rates guide, and a full purchase-to-disposal run-through is in our worked capital allowances example.

Common Claim Errors

• Claiming AIA on a car. Never available. Use the CO2-banded writing down allowance route.
• Claiming AIA on building fabric. Only the plant, fixtures and integral features inside qualify.
• Two related companies each claiming £1m. They share one limit; overclaiming invites penalties.
• Expensing capital items as revenue. Capital spend must go through the capital allowances computation, not straight to the profit and loss account.
• Claiming AIA on an asset introduced from personal ownership. It gets writing down allowances on market value, not AIA.
• Missing the amendment window. An unclaimed AIA cannot be resurrected once the 12-month amendment window closes; the spend is stuck in the pool at 14% (main rate, periods from April 2026).

How Holloway Davies Can Help

We prepare capital allowance computations for companies, sole traders and partnerships, including group AIA allocations, vehicle classifications and fixtures claims on property purchases. If you want a planned purchase reviewed before you commit, contact us or see our full range of services.

Sources

1. Claim capital allowances: annual investment allowance. GOV.UK. gov.uk/capital-allowances/annual-investment-allowance. Retrieved 2026-08-25.
2. Capital Allowances Manual CA23080+ (annual investment allowance). HMRC. gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23080. Retrieved 2026-08-25.
3. Claim capital allowances: business cars. GOV.UK. gov.uk/capital-allowances/business-cars. Retrieved 2026-08-25.