Information GuideCapital Allowances for Landlords
Plain-English guide to what landlords can and cannot claim. Information only; not tax/legal advice. England & Wales. Current as at September 2026.
Start Here — Can I Claim?
Your answer depends entirely on what type of property you have. Find your situation in the boxes below.
Standard Buy-to-Let (House or Flat)
Items inside the home — sofas, carpets, white goods, curtains, beds — do not qualify for capital allowances. This rule is firm and has no exceptions for residential lettings.
Use instead: Replacement of Domestic Items Relief — tax relief when you replace an existing item with a like-for-like one. A new sofa replacing a broken old sofa qualifies. Buying a first sofa when you first furnish the property does not.
Exception: The common parts of HMOs and some mixed-use buildings may have limited capital allowances eligibility on qualifying fixtures in shared areas. This is a specialist area — seek professional advice if you own an HMO or mixed-use property.
Furnished Holiday Let (FHL)
Update — April 2025: The FHL tax regime was abolished from 6 April 2025. You can no longer make new capital allowances claims on FHL furniture, fittings, or equipment from that date.
If you had an existing pool before April 2025: Continue claiming writing-down allowances on that existing balance until it is exhausted.
For new expenditure from April 2025: Your former FHL is taxed as a standard residential letting. Use Replacement of Domestic Items Relief for replacing furnishings.
Commercial Property
Shops, offices, warehouses, and the common parts of qualifying buildings can often qualify. You can claim capital allowances on qualifying fixtures and integral features — things permanently built into the fabric of the building, such as electrical wiring, heating and cooling systems, water and drainage systems, and fitted units. These are distinct from furniture or equipment that can be moved.
What counts as a "fixture"? A fixture is something permanently attached to the building — wiring, pipework, heating systems, fitted shelving. It cannot simply be picked up and moved out. Furniture, appliances, and portable equipment are not fixtures.
Key step: A section 198 election is usually essential when you buy a commercial property that already has fixtures — this legally fixes the value so your future claims are protected.
The Relief Most Landlords Actually Use — A Worked Example
The short answer for most landlords: if you rent out an ordinary house or flat, you cannot claim capital allowances on the things inside it — but you can claim Replacement of Domestic Items Relief when you replace worn-out furniture or appliances. The rest of this page’s detail on Annual Investment Allowance and Writing Down Allowances mainly matters for commercial property; if you only have residential lets, the example below is the one that applies to you.
If you rent out a normal house or flat, this is the one that applies to you. Read it slowly — every number is shown, nothing is skipped.
The legal basis for this relief is section 311A of the Income Tax (Trading and Other Income) Act 2005; HMRC explains it in its Property Income Manual at PIM3210.
The situation (plain English)
Your rental flat came with a washing machine. After three years it breaks and cannot be repaired. You buy a new one of a similar standard. You want to know: can I get any tax relief on the new machine, and how much?
Step 1 — Check it is a replacement, not a first purchase
The old washing machine was already there for your tenant to use. You are replacing it, not adding something new. This passes the test. (If you had put a washing machine into a flat that never had one, that would be a first purchase and would not qualify — the relief is only ever for replacements.)
Step 2 — Add up what you actually spent
You can include the cost of getting the new item delivered and installed — not just the price on the box.
Step 3 — Take off anything you got for the old one
If you got money for the old item (sold it, or a trade-in discount), you take that off. If you just threw it away and got nothing, there is nothing to take off here.
Step 4 — Work out the amount you can claim
Step 5 — See what that saves you in tax
You take the £460 off your rental profit before your tax is worked out. How much actual cash that saves depends on your tax rate:
In plain terms: the taxman effectively pays for part of your new washing machine. A higher-rate taxpayer gets £184 of a £480 machine back through lower tax.
Step 6 — Where you put it on your tax return
You enter the £460 as an expense on the property pages (SA105) of your Self Assessment tax return, in with your other allowable costs. Keep the receipt for the new machine and a note of what you got for the old one, in case HMRC ever asks.
One catch to remember: you can only claim a like-for-like replacement. If you replaced a basic £300 machine with a top-of-the-range £900 one, you could only claim the cost of an equivalent basic machine, not the fancy upgrade. Replace like with like and the whole cost counts.
What Are Capital Allowances? (The Simple Version)
Start here — this is all you need to understand before anything else
In plain words:
When you buy something expensive for your property business — like a boiler for a commercial unit, a laptop for managing your portfolio, or a heating system — the government lets you reduce your tax bill by deducting some or all of the cost from your taxable profits. That tax deduction is called a capital allowance.
The most important thing to know first:
If you own a standard residential buy-to-let — a house or flat you rent out to tenants — you cannot claim capital allowances on the things inside the property (sofas, carpets, white goods, curtains). There is a different, simpler relief for those: Replacement of Domestic Items Relief. Capital allowances mainly apply if you own commercial property or have qualifying business equipment used in an accounts-based letting business.
Step 1: You Buy a Qualifying Asset
A piece of business equipment, a commercial fixture, a building improvement — not a repair, and not furniture inside a residential home.
Step 2: You Claim the Relief
Rather than paying tax on your full rental income, you deduct the cost of the qualifying asset — either all at once in the first year (AIA) or gradually over several years (WDA).
Step 3: Your Tax Bill Falls
HMRC lets you deduct that cost before calculating the tax you owe on your rental profits. Lower taxable profit means lower tax. Simple.
Does It Matter Whether I Own Personally or Through a Company?
Short answer: both can claim — but the tax saving works slightly differently
Individual Landlords (Personal Ownership)
Capital allowances reduce your Income Tax bill on rental profits. You have access to AIA and the standard writing-down allowance pools, but not Full Expensing (companies only).
- AIA — 100% relief up to £1,000,000 in year one
- Main pool WDA — 14% per year (from 6 April 2026)
- Special rate pool WDA — 6% per year
- SBA — 3% per year on qualifying non-residential structures
Limited Companies (SPVs)
Capital allowances reduce your company's Corporation Tax bill on profits. Companies have access to all the same allowances as individuals — plus Full Expensing (100% on qualifying new main-rate assets, companies only).
- AIA — 100% relief up to £1,000,000 in year one
- Full Expensing — 100% relief on qualifying brand-new main-rate assets in the year of purchase (companies only; similar to AIA but with no £1m annual cap for new equipment)
- Main pool WDA — 14% per year (from 1 April 2026)
- Special rate pool WDA — 6% per year
In plain words:
The rules about what qualifies are the same whether you are an individual or a company. The differences are: (1) which tax is being reduced — Income Tax for individuals, Corporation Tax for companies; and (2) companies get Full Expensing (100% relief on qualifying new purchases) that individuals do not get. Same qualifying rules. Different tax buckets.
Key Similarities (same for everyone):
Same qualifying asset rules. Same AIA limit of £1,000,000. Same record-keeping requirements. Same section 198 election rules for commercial property purchases.
Key Concepts in Plain English
The four things you need to understand — explained one at a time, as simply as possible
Annual Investment Allowance — "Get All the Relief in Year One"
In plain words:
AIA lets you deduct the full cost of qualifying equipment or machinery from your taxable profits in the same year you buy it. You do not have to spread the relief over years. The annual limit is £1,000,000 — a permanent limit since April 2023 and far more than most individual landlords will ever spend on qualifying equipment in a single year.
Relief in Year One
Full cost deducted immediately from taxable profits
Annual Limit
£1,000,000 per year — permanent since April 2023
Not for Cars
Cars are excluded from AIA — they go into a pool at a separate rate
Simple example:
You spend £8,000 on a qualifying commercial heating system. You claim AIA and deduct the full £8,000 from your rental profits this year — reducing your tax bill immediately rather than chipping away at it year after year.
Writing Down Allowance — "Spread the Relief Over Several Years"
In plain words:
If you cannot or choose not to use AIA — or if you have historic assets still being written off — you still get tax relief, but it is spread over time. Each year you deduct a percentage of the remaining pool balance. Think of it like eating a biscuit one bite at a time: you'll get through it eventually, just not all at once.
Main Pool
Most plant and machinery. Rate reduced from 18% from April 2026 (Autumn Budget 2025). Applied to the reducing pool balance each year — meaning: you always claim 14% of whatever is left in the pool, so the amount you claim gets smaller year by year as the pool shrinks.
Special Rate Pool
Long-life assets and integral features of buildings (heating, electrical systems). Rate unchanged.
The WDA in numbers (plain example):
You have £10,000 of assets in the main pool. Year 1: claim 14% = £1,400 deducted. Pool remaining: £8,600. Year 2: claim 14% of £8,600 = £1,204. Pool remaining: £7,396. And so on, year after year, until the pool is gone. Each year's claim is smaller than the last because you are always claiming the same percentage of a shrinking balance.
Section 198 Election — "Agreeing the Fixtures Value When You Buy"
In plain words:
When you buy a commercial property, there are almost certainly fixtures already built in — electrical wiring, heating systems, fitted units. These fixtures have a value for capital allowances purposes. A section 198 election is a formal, legally binding written agreement between you (the buyer) and the seller that fixes — in writing — exactly what portion of the purchase price relates to those fixtures. Once agreed, that is the amount you can claim allowances on. Without it, HMRC can dispute the value at any future point and you could lose the claim entirely.
- Must be agreed in writing between buyer and seller
- Must be submitted to HMRC within 2 years of the property purchase
- Protects your claim from any future HMRC challenge on the fixtures value
- Essential for commercial property transactions involving existing fixtures
Structures and Buildings Allowance — "Tax Relief on the Building Itself"
In plain words:
Most capital allowances are for moveable things — equipment and fixtures. SBA is different: it gives relief on the cost of constructing or improving a non-residential structure — a commercial unit, a warehouse, an office conversion. The relief is 3% per year on a straight-line basis (the same amount each year) for up to 33⅓ years.
- Only for non-residential structures — does not apply to houses or flats
- 3% per year, same amount each year (not a reducing balance)
- Covers construction costs, renovation, and qualifying conversion
- Does not cover: land, planning costs, or existing fixtures (those use AIA/WDA)
Simple example:
You spend £200,000 converting a commercial unit. SBA at 3% gives you £6,000 tax deduction every year for up to 33 years. Over a 10-year hold, that is £60,000 of deductions from qualifying construction costs — worth £24,000 in saved tax at the 40% rate.
How It Works in Practice — A Commercial Property Purchase
A step-by-step walk through a simple real-world scenario — read slowly and follow the numbers
The Situation
What You Do and What It Saves
- You claim AIA on the £30,000 — deducting the full amount from taxable rental income this year
- If you pay Income Tax at 40%, a £30,000 deduction saves you £12,000 in tax
- Without the section 198 election, HMRC could argue the fixtures were worth only £5,000 — you would lose £10,000 of that saving
- The election is why the paperwork matters so much on commercial purchases
Why the section 198 election is the single most important step:
The £300,000 paid for the building is not all claimable — you can only claim on the fixtures portion. Without the election, neither you nor HMRC has an agreed figure for that portion. The election removes all ambiguity: £30,000 is the agreed fixtures value, locked in writing, protected from challenge. That is what makes the claim stick.
What About Phones, Laptops, and Office Equipment?
Small admin equipment used in your landlord business — treated differently depending on how you do your accounts
If You Use Cash Basis (Simplified Accounting)
Most individual landlords with rental income under £150,000 use cash basis by default.
Under cash basis, you simply deduct the business-use percentage of the cost as a regular expense in the year you pay it. No pooling, no complex calculations.
- Business-use % of the device cost deducted as an expense
- Business-use % of monthly contract costs also claimable
- Claim in the year of purchase — not spread over years
- Cars are excluded from this treatment (different rules apply)
Example:
You buy a laptop for £1,200 and use it 60% for your property business, 40% personal. Claim £720 (60% of £1,200) as a business expense this year.
If You Use Accruals / Are a Company or FHL Owner (Traditional Method)
Companies always use accruals. Some individual landlords over the £150,000 threshold also use accruals.
Under accruals accounting, business equipment goes through the capital allowances system — claimed via AIA (or the pool if AIA is unavailable), with the private-use element stripped out before the claim is made.
- Claim via AIA or pool — not as a direct day-to-day expense
- Apportion for private use: claim the business-use element only
- Keep detailed records showing the business vs private usage split
Example:
Your company buys a laptop for £1,200. 60% is business use. You claim £720 via AIA (60% of £1,200). The private-use portion of £480 cannot be claimed at all.
What Records Do You Need to Keep?
Records are not optional — they are the claim
The golden rule — say it once, mean it forever:
Every capital allowances claim must be backed by paperwork. If HMRC ever asks about your claim — and they can ask years later — you need to prove with actual documents what you bought, when you bought it, what it cost, and what percentage is used for the business. No paper trail means no claim. It is as simple as that.
Purchase Documents
- Invoices for every qualifying item — dated, itemised, supplier-named
- Completion statements from property purchases
- Purchase contracts and heads of terms
- Bank statements or payment receipts as proof of payment
Legal Documents
- Section 198 elections — signed, dated, submitted to HMRC
- Any fixture agreements with sellers
- Surveyor's valuation reports on qualifying expenditure
- Legal correspondence about fixtures and assets
Asset Records
- A written asset list — what you have, when you bought it, what it cost
- Date each asset was first put into business use
- Which pool each asset is allocated to (main or special rate)
- Business-use percentage for each item
Timeline Records
- Installation dates for fixtures and equipment
- Date first used in the business
- Disposal dates when assets are sold, scrapped, or replaced
- Replacement dates and costs
Jargon Buster — Every Term You Will Encounter
Plain-English definitions for the technical language in this area — bookmark this section
Annual Investment Allowance
The allowance that gives you 100% tax relief on qualifying equipment costs in the year of purchase — up to £1,000,000 per year. The most useful relief for most landlords with qualifying commercial property or business equipment.
Writing Down Allowance
Annual percentage relief on assets not fully relieved by AIA. Main pool: 14% per year from April 2026 (down from 18%). Special rate pool: 6% per year. Applied to the reducing pool balance year after year until the pool is gone.
Section 198 Election
A formal, legally binding written agreement between buyer and seller that fixes the value of fixtures included in a property purchase. Deadline: 2 years from purchase. Without one, HMRC can dispute the fixtures value and your claim could fail.
Structures and Buildings Allowance
Tax relief at 3% per year on the cost of building or improving non-residential structures (commercial buildings, offices, warehouses). Claimed over up to 33⅓ years. Does not apply to residential properties.
Domestic Items Relief
The relief you use instead of capital allowances for replacing furniture and white goods in standard residential buy-to-lets. This is not a capital allowances claim — it is the alternative you use when capital allowances do not apply. Covers the cost of replacing an existing item like-for-like. Does not cover the original purchase of furnishings when first letting.
Capital Allowances Pool
A running total of the value of assets on which you have not yet claimed full tax relief. You claim a percentage of this pool balance each year as WDA. Different assets go into different pools — main pool (14% from April 2026) or special rate pool (6%).
Frequently Asked Questions
Common questions about capital allowances for landlords — answered in plain English
Can I claim capital allowances on a sofa in a standard buy-to-let?
No. Capital allowances do not apply to items inside a residential dwelling. The rule has no exceptions for standard residential lettings — furniture, white goods, carpets, and curtains in a home are outside the capital allowances system entirely. Use Replacement of Domestic Items Relief instead when you replace an existing item like-for-like.
Can I still claim capital allowances on my furnished holiday let?
No — for any new expenditure from 6 April 2025. The furnished holiday let (FHL) regime was abolished on that date. New purchases on former furnished holiday let properties cannot be added to a capital allowances pool from that date. If you had an existing capital allowances pool before April 2025, you can continue claiming writing-down allowances on that balance until it is fully exhausted. For professional advice on your transitional position, speak to your accountant.
What is the difference between AIA and writing-down allowances?
AIA gives you all the relief immediately — 100% in year one, up to £1,000,000. Writing-down allowance gives you relief gradually — 14% of the remaining pool balance each year for main-rate assets from April 2026. AIA is almost always more valuable because tax relief received now is worth more than the same relief spread across ten or fifteen years. WDA is used when AIA is unavailable or when the AIA limit has already been used up.
Why do I need a section 198 election?
It locks in the fixtures value so your future claims are clear and legally protected. Without one, you and HMRC have no agreed figure for what portion of a property's purchase price relates to qualifying fixtures. HMRC can dispute that figure at any time, potentially reducing or eliminating your claim. The election is agreed in writing between buyer and seller and submitted to HMRC — and the 2-year deadline is absolute.
Can I claim capital allowances on rental property improvements?
It depends on the property type and the nature of the improvement. For commercial properties, qualifying fixtures and integral features — electrical systems, heating, specialist fit-out — may be eligible. For residential properties, most improvements are not claimable via capital allowances, though capital costs can affect your CGT calculation on eventual disposal. Each case needs individual professional assessment.
How to Get Started (Simple Steps)
Four straightforward steps to begin managing your capital allowances position
Identify Your Letting Type
Work out whether you have a standard residential BTL, a commercial property, or a former FHL. This single question determines whether capital allowances are available to you at all.
List Possible Qualifying Assets
Gather invoices and contracts for items that might qualify — commercial fixtures, business equipment, integral features. For commercial property, consider instructing a specialist surveyor to identify all qualifying expenditure you may have missed.
Check Your Section 198 Election
If you have bought a commercial property, check whether a section 198 election was made. If you are within 2 years of purchase and none exists, act immediately — the window closes permanently after that deadline.
Get Professional Guidance
Capital allowances on commercial property require professional advice. Use our enquiry form to discuss your specific situation. We provide information and records support — your accountant or tax adviser handles the formal claim.
What happens next:
You hand over your records → your accountant instructs a surveyor → the surveyor produces a qualifying expenditure report → your accountant files the claim in your tax return. Our role is the records side: organised, evidenced, and ready for the surveyor and accountant.
For records that support your capital allowances position, see our landlord bookkeeping service or 1-to-1 training. Commercial landlords in scope for Making Tax Digital must keep their capital allowances records digitally from their start date.
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