Computer equipment

Conditions

• Equipment used in the business usually qualifies for capital allowances. The Annual Investment Allowance (AIA) gives full relief in the year of purchase, up to £1 million per accounting period (sourced from GOV.UK Content API, June 2026 — re-check after each Budget as this figure has changed before). AIA is available to sole traders, partnerships, and limited companies.
• Under cash basis accounting, computers and equipment are claimed as an allowable expense directly rather than through capital allowances (cash basis only permits capital allowances on business cars).
• Where there is private use, the claim is restricted to the business proportion.
• For a limited company, the equipment is a company asset bought with company funds.
• Employees can claim capital allowances on equipment necessarily required for the job, but only where there is no significant private use and the employer has not provided the item.
• Capital-allowances rules changed in 2026 for spending above the £1m AIA: a new 40% first-year allowance now applies to qualifying new main-rate equipment (companies from 1 January 2026; sole traders and partnerships from 6 April 2026) — new items only, with cars and second-hand assets excluded. Anything not covered by AIA or this allowance is written down at the reduced main-pool rate of 14% (down from 18%) from April 2026. For most small businesses the £1m AIA still gives full relief in the year of purchase, so these changes mainly affect larger purchases.

Common mistakes

• Treating a capital purchase as a normal day-to-day expense rather than claiming it correctly as a capital allowance.
• Ignoring private use on a device that is also used personally.
• An employee buying kit the employer would have provided and assuming it is automatically claimable.

What to keep

• Purchase invoices showing the item and cost.
• A note of the business-use proportion where the device is also used privately.

Real-world example

A sole trader buys a £1,200 laptop used almost entirely for work. They claim it through the Annual Investment Allowance, restricting the claim slightly to reflect occasional personal use.

Frequently asked

Related allowances