Capital allowances are one of the most underclaimed tax reliefs in UK property. They provide relief on the cost of qualifying assets – plant, machinery, fixtures, integral features – when deducted against your taxable profits, and a thorough claim for a commercial property purchase can be worth tens of thousands.
The position has changed in a few important ways for 2026/27. The main rate Writing Down Allowance is dropping from 18% to 14%. A new 40% First Year Allowance has been introduced, available to both companies and unincorporated businesses.
The Furnished Holiday Lettings regime was abolished in April 2025, taking with it the capital allowance treatment that landlords with holiday lets used to enjoy.
This guide covers what’s available, who can claim what, and the practical points worth getting right before your next property purchase or refurbishment.
What Property Types Qualify
The first question to settle is which of your properties can generate a capital allowances claim. The rules here trip a lot of investors up.
- Commercial property: Broad access to capital allowances. Fixtures, integral features, plant and machinery within the building can qualify, while structural building costs may fall under SBA instead.
- Residential buy-to-let: Capital allowances are not available on items used inside an individual dwelling. Common parts of buildings with multiple residential units – entrance halls, lifts, shared corridors and similar communal areas – can attract allowances where the items aren’t used inside the dwellings themselves.
- Mixed-use property: Allowances apply to the commercial portion. A shop with a flat above it can produce a partial claim, normally apportioned by floor area.
- Furnished Holiday Lettings: No longer eligible for new expenditure. The FHL regime was abolished from 6 April 2025 for income tax and CGT, so holiday lets now sit in the same bracket as standard residential property.
For landlords, the FHL change is the most consequential of recent years. Properties that used to give a full capital allowances claim on furniture, white goods and integral features now don’t for new expenditure. Existing qualifying expenditure already sitting in a capital allowance pool by 5 April 2025 can continue to receive WDAs and balancing adjustments after repeal – the change is forward-looking.
Residential landlords are generally left with Replacement of Domestic Items Relief for qualifying replacement items, rather than capital allowances on initial purchases.
The Allowances That Matter
Six allowances cover most property investment scenarios. Some apply only to companies, some to anyone running a business.
Annual Investment Allowance (AIA)
The AIA gives 100% relief on qualifying capital spend in the year of purchase, up to ÂŁ1 million. It applies to limited companies, sole traders and most individual partnerships, but not trustees or partnerships that include non-individual members.
For property investors, it covers most plant and machinery, integral features (heating, lighting, electrical systems, lifts, cold water systems), and qualifying fixtures within commercial property. The ÂŁ1 million cap resets each year, so timing larger refurbishments across tax years can sometimes unlock more relief than running everything together.
The AIA is shared across groups of companies under common control – worth knowing if you own several property companies.
Full Expensing
Full Expensing gives companies 100% first-year relief on new, unused main rate plant and machinery, with no cap. It’s been permanent since 2024.
A few conditions matter:
- Companies only: Sole traders and partnerships use the AIA instead.
- New and unused: Second-hand assets don’t qualify.
- Not for leasing: Assets provided for leasing generally don’t qualify, except for background plant or machinery within a building.
For property investors with significant commercial fit-out spend through a company, Full Expensing means there’s no upper limit on the relief in a given year. Most investors will use AIA first for special rate pool items and Full Expensing for main rate pool items above ÂŁ1 million.
50% First Year Allowance on Special Rate Pool
The 50% FYA covers new special rate pool assets bought by companies – integral features, long-life assets, solar panels and similar. The remaining 50% goes into the special rate pool and attracts WDA at 6% in following years.
The same leasing restriction as Full Expensing applies: the asset can’t generally be provided for leasing, except for background plant or machinery within a building.
For commercial property refurbishments where the electrical, heating and lighting installations are a major part of the spend, this allowance is often where the bulk of the year-one tax saving sits.
40% First Year Allowance (New for 2026)
A new 40% First Year Allowance was introduced from 1 January 2026 for qualifying new and unused main rate plant and machinery. Unlike Full Expensing, it’s available to both companies and unincorporated businesses, and it can also be useful where leasing restrictions would prevent a Full Expensing claim.
The remaining 60% of expenditure enters the main rate pool and attracts WDA in following years. The 40% FYA doesn’t cover cars, second-hand assets or special rate items.
Writing Down Allowances (WDA)
WDA gives ongoing annual relief on assets that didn’t get full relief in year one – typically because the AIA was exhausted, the asset doesn’t qualify for Full Expensing, or it was bought second-hand. The rates for 2026/27 are:
- Main rate pool: 14% per year, reduced from 18% from 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax
- Special rate pool: 6% per year, unchanged
The 18% to 14% drop matters. Assets sitting in the main pool generate less annual relief from this year onwards, so timing capital spend to use AIA or Full Expensing fully – rather than letting unused expenditure drop into the pool – is more important than it was.
Businesses with accounting periods spanning the rate change use a hybrid rate (a blend of 18% and 14%) for the transitional year.
Structures and Buildings Allowance (SBA)
SBA gives 3% annual relief on construction, renovation and refurbishment costs of non-residential buildings, claimable over 33â…“ years.
It covers structural work, professional fees and direct construction costs that don’t otherwise qualify as plant or machinery. SBA is a period-by-period claim. Any SBA not claimed for a period cannot be carried forward and is lost, so the allowance statement and annual claims need to be kept up to date.
SBA isn’t a fast relief, but it captures spend that historically had no tax treatment at all. For commercial property developers and investors, it’s worth setting up properly from day one.
Land Remediation Relief
For limited companies dealing with contaminated or derelict land, Land Remediation Relief gives an enhanced Corporation Tax deduction – the normal 100% deduction plus an additional 50% – on qualifying remediation costs of land acquired from a third party in a contaminated state. Where the company is loss-making, the LRR-related loss can be surrendered for a payable tax credit.
LRR covers:
- Removal of contamination caused by previous industrial activity, including asbestos
- Treatment of qualifying contaminants or hazards such as radon, arsenic or Japanese knotweed, where the statutory conditions are met
- Bringing derelict land back into productive use where the dereliction predates April 1998
LRR is one of the more specialist allowances, and the qualifying conditions are tight. For developers acquiring brownfield sites, getting the analysis right early can be worth six-figure sums.
Identifying Hidden Allowances in Property Purchases
One area worth particular attention is identifying capital allowances embedded in commercial property you’ve bought. A standard purchase price doesn’t break out the value of the fixtures and integral features inside, but the seller’s tax history determines whether you can claim on them.
For property bought since 2014, the buyer and seller need to agree the value of fixtures within two years of completion through a Section 198 election. Without that election, the buyer typically loses the right to claim. Many buyers don’t realise this at the point of purchase and end up unable to claim anything on tens of thousands of pounds of integral features that came with the building.
For older buildings without prior owner claims, a retrospective capital allowances survey can sometimes identify substantial unclaimed pools.
Specialist firms run these surveys, and the typical finding is that 20–40% of a commercial property’s purchase price is attributable to plant, fixtures and integral features.
A few practical points:
- Pre-purchase due diligence: Ask the seller’s solicitor whether prior claims have been made and whether a Section 198 election will be available.
- Refurbishment spend: Track expenditure by category – plant, integral features, structural – so claims can be made in the right pool.
- Records: Keep detailed invoices, contractor breakdowns and any cost reports. Capital allowance claims are evidence-driven, and HMRC can ask for backup.
- Mixed-use developments: Allocate costs between the qualifying and non-qualifying parts. Apportionment by floor area is often the starting point.
How Double Point Can Help
Capital allowances are among the higher-return areas of tax planning for property investors, particularly for commercial purchases and refurbishments. A thorough claim can mean the difference between a building paying tax for years and a building generating tax-free income for the same period.
At Double Point, our chartered accountants help property investors across the UK identify and claim every capital allowance their portfolio is entitled to – running pre-purchase reviews, structuring refurbishment spend, preparing Section 198 elections, and integrating allowances with the wider tax planning strategy. Our landlord’s guide to 2026 covers the wider position for property businesses.
Book a free consultation and we’ll review your portfolio for unclaimed capital allowances and the changes coming in 2026/27.