Capital Allowances

Capital allowances are tax deductions that businesses can claim on the cost of certain assets, like equipment or machinery, over time. Instead of deducting the full cost of an asset in the year it was purchased, businesses can spread the deduction over several years. This reduces taxable profits, leading to lower tax bills. Capital allowances reflect the asset's depreciation or wear and tear, acknowledging that it loses value as it's used. This system helps businesses manage their cash flow and encourages investment in new assets by providing tax relief.