Writing-down allowances (WDAs) are a type of capital allowance that let you deduct a percentage of an asset’s value from your taxable profits each year. In some cases, you may be able to claim more relief using other capital allowances, such as the Annual Investment Allowance or first-year allowances.
There are two rates of WDA for plant and machinery. To calculate them, you first group your expenditure into separate pools:
- the main pool - this includes expenditure on most items - the rate is 18%; and
- the special rate pool includes special rate expenditure including long-life assets, integral features, certain thermal insulation and some cars - the rate is 6%.
Assets are grouped into pools, and WDAs are applied to the balance of each pool after adding new purchases, deducting disposal and accounting for any private use.
The Small Pools Allowance provides an alternative to WDAs. If the balance in the main or special rate pool is £1,000 or less, you can claim the entire amount in one year rather than applying the WDA percentage. The Small Pools Allowance cannot be used for single-asset pools and is prorated for accounting periods shorter or longer than 12 months. You can choose between claiming WDAs or the Small Pools Allowance, where possible, but cannot claim both.