What are Capital Allowances actually worth?
Most business’s will be aware that when they purchase or improve their commercial property, Capital Allowances can offer significant tax relief, but the amount of tax savings due can be a mystery until the tax work is completed. Below we aim to give you a rough idea of what to expect for your property projects, based on our experience with hundreds of properties and claims.
The below examples assume a company paying corporation tax at 25%, however, individuals & partnerships can also claim capital allowances, to generate savings against their income tax.
The “Good” Allowances
There are many types of allowances, offering relief at various rates, but for the sake of simplicity, we are going to consider what qualifies for Plant & Machinery Allowances, vs structural or non-qualifying spend. Plant & Machinery Allowances can provide 100% deductions from taxable profit, in the first year of spend, through enhanced reliefs like the Annual Investment Allowance & Full Expensing, while structural spend deductions will arise slowly over time (3% per year by default).
So for a property that is “50% qualifying”, we actually mean, 50% of the expenditure will qualify for plant & machinery allowances, and likely be 100% deductible in the first year.
Offices
Modern offices are intricate buildings with a variety of services, systems, furnishings and installations that result in more allowances than other property types. The air conditioning and ventilation systems will be extensive, data and building management systems may be present throughout, and the workspaces will be furnished to a high specification, not to mention the furniture and computer installations. You might expect the following allowances from an office project:
|
Project |
Qualifying P&M |
Example Allowances |
Tax saving (25%) |
|
£1m used property Purchase |
25% |
£250,000 |
£62,500 |
|
£1m Construction |
50% |
£500,000 |
£125,000 |
|
£1m fit-out/refurb |
70% |
£700,000 |
£175,000 |
Warehouses & Industrial
Warehouses and industrial units tend to be simpler buildings with a focus on practical space. Services may be simpler than you’d find in an office, but equally specialist installations like roller shutter doors may increase the qualifying value. Where machinery or cranes are included, expect the qualifying amounts to be much higher than typical.
|
Project |
Qualifying P&M |
Example Allowances |
Tax saving (25%) |
|
£1m used property Purchase |
20% |
£200,000 |
£50,000 |
|
£1m Construction |
30% |
£300,000 |
£100,000 |
Bars & Restaurants
Unlike Offices and Industrial settings, bars & restaurants can benefit from Decorative Asset legislation, meaning much of the additional expenditure in customer areas is qualifying for these businesses. Additionally kitchens and WC facilities will include plenty of plant & machinery spend.
|
Project |
Qualifying P&M |
Example Allowances |
Tax saving (25%) |
|
£1m used property Purchase |
25% |
£250,000 |
£62,500 |
|
£1m Construction |
40% |
£400,000 |
£100,000 |
|
£1m fit-out/refurb |
60% |
£600,000 |
£150,000 |
Furnished Holiday Lets
The Furnished Holiday Lettings rules were abolished in April 2025, but there’s still time to claim for expenditure incurred before April. Every FHL project is unique and the savings available can vary from the below estimates. Make sure you don’t miss out on the chance to claim on your FHL.
|
Project |
Qualifying P&M |
Example Allowances |
Tax saving (25%) |
|
£1m used property Purchase |
25% |
£250,000 |
£62,500 |
|
£1m Construction |
35% |
£350,000 |
£87,500 |
|
£1m fit-out/refurb |
60% |
£600,000 |
£150,000 |
Naturally there are countless property types not mentioned here, and the specifics of any projects can make all the difference. Whether planning a capital project, or considering expenditure already incurred, get in touch for a free bespoke assessment of the tax savings available on your property.