Computer equipment

Conditions

1. Equipment you keep to use in your business is plant and machinery and usually qualifies for capital allowances. The Annual Investment Allowance (AIA) lets you deduct the full value of the item from your profits before tax. The AIA amount is £1 million, and you get a new allowance for each accounting period; adjust it if your accounting period is more or less than 12 months.
2. AIA is available to sole traders, partnerships and limited companies. For partnerships there is a restriction: AIA is only available where all the members are individuals, so a partnership with a corporate partner cannot claim it.
3. Under cash basis accounting — the default method for sole traders and partnerships without corporate partners since 6 April 2024 — computers and equipment are claimed as an allowable expense directly rather than through capital allowances. Cash basis users can only claim capital allowances on business cars.
4. Where there is private use, the claim is restricted. If you are a sole trader or in a partnership you cannot claim the full value of an item you also use outside the business: reduce the capital allowances you claim by the amount of that outside use.
5. For a limited company, the equipment is a company asset bought with company funds and relieved through capital allowances. Office equipment provided only for business use is exempt from reporting, but an asset made available for a director's or employee's private use as well must be reported on form P11D, with Class 1A National Insurance due on the value of the benefit.
6. Employees rarely qualify. HMRC's guidance is that most employees will not be able to satisfy the statutory test for capital allowances in section 36(1) CAA 2001 in relation to the purchase of computers, laptops and their peripherals: even where the equipment is essential for the duties, it is very often the case that the employer will supply what is needed, and it is not enough to claim that what the employer provides or will provide is inadequate (EIM36730). GOV.UK's employee guidance sets the same conditions from the other side: you can only claim where you need the equipment to do your job, and not at all where the employer gives you all the money back or offers you an alternative.
7. On private use, the two HMRC sources state the position as follows. GOV.UK's employee guidance: you can only claim tax relief for equipment expenses where you use the equipment for work and there's no significant private use. HMRC's Employment Income Manual: the plant or machinery does not have to be 'wholly and exclusively' used for the performance of the duties, and if there is private use the allowances can be apportioned (EIM36540); apportionment is made on a 'just and reasonable' basis having regard to all the circumstances, principally the actual use made of the item in the year of assessment (EIM36570).
8. Capital-allowances rules changed in 2026. A 40% first-year allowance is available for expenditure incurred on or after 1 January 2026 on plant or machinery that was bought new and unused, qualifies for the main rate of writing-down allowance and is not a car; second-hand assets are excluded, and there is a specific exclusion for overseas leasing. The relief is available to all businesses, not just incorporated ones. In the next accounting period you claim writing-down allowances on the remaining 60% of the cost.
9. Anything not covered by the AIA or a first-year allowance is written down at the main rate, which changed from 18% to 14% on 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax. An accounting period that includes the day the rate changed uses a hybrid rate for that period. For most small businesses the £1 million AIA still gives full relief in the year of purchase, so these changes mainly affect larger purchases.
10. Announced at Budget 2026, and not in effect yet: the government says it 'will introduce legislation in Finance Bill 2026-27 to increase the main rate first-year allowance to 50% for expenditure incurred on or after 1 January 2027 and to reduce the main rate writing-down allowance to 12%, to take effect from 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax' (HMRC, Budget 2026 Overview of tax legislation and rates, 28 October 2026). The rates stated on this page are the ones that apply now.

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.
• Claiming the AIA on a laptop you already owned personally before you started using it in the business. You cannot claim AIA on items you owned for another reason beforehand — claim writing-down allowances instead, based on the market value when you brought the item into the business.
• An employee buying kit the employer would have provided and assuming it is automatically claimable. HMRC's starting point is the opposite: most employees cannot satisfy the test for computers and their peripherals.

What to keep

• Purchase invoices showing the item and cost.
• A note of the business-use proportion where the device is also used privately.
• Where a device you already owned is brought into the business, a record of its market value at that point.

Real-world example

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

Frequently asked