What Is the Writing Down Allowance?
Capital allowances writing down allowance is how HMRC lets your company deduct a percentage of the remaining value of plant and machinery each year. When you buy a qualifying asset — computers, office equipment, vehicles, machinery — you cannot always deduct the full cost against taxable profit in the year of purchase. Instead, the asset enters a pool and you claim WDA annually until the pool is exhausted.
Capital allowances cover all the ways your company can get tax relief on capital expenditure. The writing down allowance is one part of that system, sitting alongside the Annual Investment Allowance and full expensing. Most agency directors encounter WDA on assets that either exceed the AIA limit, were bought before full expensing existed, or do not qualify for the AIA at all — such as cars, or assets bought for leasing.
You can read more about how capital expenditure interacts with your annual tax position in our annual tax review checklist for limited company directors.
Capital Allowances Writing Down Allowance 14% 2026: The Rate Cut Explained
The main rate writing down allowance — the rate that applies to most plant and machinery in your main pool — drops from 18% to 14% per year. For companies within corporation tax, the change takes effect from 1 April 2026. For unincorporated businesses within income tax, it applies from 6 April 2026.
This change was announced in the Autumn Budget 2025 and is legislated in Finance Act 2025-26. You can verify the details on GOV.UK.
HMRC estimates approximately 650,000 businesses are affected — those with assets in the main pool that are being written down over time rather than claimed in full under AIA or full expensing.
What changes and what stays the same
- Main pool WDA: 18% per year before 1 April 2026 / 14% per year from 1 April 2026
- Special rate pool WDA: 6% — no change
- Annual Investment Allowance: £1 million — no change
- Full expensing (companies only): 100% on qualifying new main rate assets — no change
- New 40% first-year allowance: Available from 1 January 2026 for qualifying assets
To illustrate the cash flow difference: if your company has £60,000 of assets remaining in the main pool at the start of a new accounting period, under the old 18% rate you would deduct £10,800 against profit. At the new 14% rate, the deduction falls to £8,400. At a 25% corporation tax rate, that is £600 more corporation tax due in that year alone. The difference is not dramatic for a single year, but it compounds over time on any pool balance above the AIA limit.
Which Assets Go Into Which Pool?
Understanding which pool your assets fall into determines which WDA rate applies.
Main rate pool (now 14% WDA): Most standard plant and machinery falls here. For a digital or creative agency, this includes computers, servers, monitors, cameras, audio equipment, office furniture, and low-emission cars.
Special rate pool (6% WDA — unchanged): Integral features of a building (electrical systems, heating, air conditioning, water systems), long-life assets with a useful economic life over 25 years, and higher-emission cars. If you lease commercial premises and fit out a studio or production space, the integral features you install could end up here.
Short-life asset elections: You can elect to put an asset in its own short-life asset pool if you expect to dispose of it within 8 years. On disposal, any remaining balance is written off immediately, which can accelerate tax relief. This option is worth considering for assets that depreciate quickly in agency environments — camera equipment, audio gear, and high-spec workstations, for example.
For a full breakdown of what you can and cannot claim as business expenditure, see our limited company expenses guide.
How the AIA and Full Expensing Interact With the WDA Cut
Most agency directors buying equipment will not be directly hit by the WDA rate cut — and that is because of the Annual Investment Allowance and full expensing. Understanding how these work together is key to managing your capital allowances position.
Annual Investment Allowance (AIA): Gives you 100% tax relief in the year of purchase on qualifying plant and machinery expenditure, up to a combined limit of £1 million per year. For a typical agency buying laptops, a server, camera equipment, and office desks in a single year, the total is likely well under £1 million. Those assets never enter a WDA pool — they are fully deducted and gone.
Full expensing (limited companies only): Where AIA does not apply or is exhausted, limited companies can use full expensing on new (not second-hand) main rate plant and machinery. This gives 100% relief on the asset in year one, effectively making the WDA rate irrelevant for that purchase.
Where WDA does still matter: Three scenarios exist where the rate cut directly affects you. First, assets bought before full expensing existed (before April 2023) that still have a pool balance being written down annually. Second, assets excluded from AIA and full expensing — cars are the most common example for agency directors. Third, assets used for leasing, which are excluded from full expensing but may qualify for the new 40% FYA from January 2026.
The Hybrid Rate: Accounting Periods That Span April 2026
If your company's accounting period crosses 1 April 2026, you do not simply switch rates mid-year. HMRC requires you to calculate a single hybrid WDA rate for that period, based on the proportion of the period falling before and after the change date.
Example: A company with a 31 December year-end has an accounting period running from 1 January 2026 to 31 December 2026. Three months fall before 1 April 2026 (at 18%) and nine months fall after (at 14%). The blended rate for that period is calculated as (3/12 × 18%) + (9/12 × 14%) = 4.5% + 10.5% = 15%. That company applies a 15% WDA for the 2026 calendar year, then 14% from 2027 onwards.
Companies with a 31 March year-end are unaffected by the hybrid calculation — their accounting period ends just before the change date. Companies with a 30 April or later year-end face the hybrid calculation only once, after which the 14% rate applies in full.
Action required if your period straddles April 2026
Your accounting software may not automatically calculate the hybrid rate correctly. Check with your accountant that the WDA calculation in your next tax return uses the blended percentage, not the flat 18% or 14% rate. An error here could result in either an underpayment or an overpayment of corporation tax.
The New 40% First-Year Allowance: What Agency Directors Should Know
To partially offset the impact of the WDA reduction, HMRC introduced a new 40% first-year allowance (FYA) for qualifying main rate expenditure from 1 January 2026. This is separate from the AIA and full expensing.
The 40% FYA is specifically designed for scenarios where the AIA is not available. The main use cases for agency directors are:
- Unincorporated businesses: If you operate as a sole trader or partnership and have exhausted your AIA, the 40% FYA provides better relief than the 14% WDA in the first year.
- Assets bought for leasing: Full expensing excludes assets bought for leasing, but the 40% FYA covers most plant and machinery used for domestic and overseas leasing (overseas leasing is excluded). Production agencies, studios, and equipment rental businesses benefit here.
- Expenditure above the AIA limit: If you invest more than £1 million in plant and machinery in a single year — unlikely for most agencies but possible for capital-intensive studio or production builds — the 40% FYA applies to the excess rather than the standard 14% WDA.
Second-hand assets, cars, and overseas leasing are excluded from the 40% FYA. It applies only to new expenditure.
If your agency does qualifying research and development, it is also worth reviewing whether any of your capital expenditure supports an R&D tax credits claim. Our guide to R&D tax credits for digital and creative agencies explains how those regimes interact with capital allowances.
Writing Down Allowance 14% 2026: Practical Impact for Agency Directors
For the typical UK digital or creative agency running through a limited company, the WDA change is unlikely to materially alter your tax bill in 2026/27 — provided you buy equipment under the £1 million AIA threshold and claim AIA in full each year.
Where the cut does matter:
- You have a residual main pool balance from assets bought before April 2023 that are still being written down year on year. That balance will now accumulate relief more slowly.
- Your agency uses company cars (which cannot be AIA-claimed). Cars are written down using WDA rates based on CO2 emissions, and higher-emission cars fall into the main pool at the new 14% rate.
- You have had a large capital investment — server infrastructure, specialist production equipment, studio fit-out costs — that partially exceeded AIA limits and entered the main pool.
The practical planning action is straightforward: if you are considering a significant capital purchase, time it before your accounting period ends so you can claim AIA in full in that year rather than carrying excess into the WDA pool. If you already have a main pool balance, consider whether any assets can be sold or written off via a short-life asset pool election.
For a broader look at how director-level tax decisions fit together, see our guide to how to pay yourself as a limited company director.
How Alto Accounting Can Help
Capital allowances planning is one of the areas where getting the detail right makes a real difference to your corporation tax bill. As an ACCA registered practice (reg. 2000003070) specialising in UK agencies, we review our clients' capital expenditure positions annually, identify WDA pool balances, time asset purchases to maximise AIA, and check that hybrid rate calculations are applied correctly where accounting periods straddle the April 2026 date.
Book a free consultation to speak with a specialist about your capital allowances position.
Frequently Asked Questions
What is the writing down allowance rate from April 2026?
The main rate writing down allowance on the main pool of plant and machinery drops from 18% to 14% per year from 1 April 2026 for companies within corporation tax. For unincorporated businesses, the change takes effect from 6 April 2026. The special rate pool, used for integral features and long-life assets, remains at 6% and is not affected by this change. You can view the official legislation on GOV.UK capital allowances.
Does the WDA cut affect me if I use the Annual Investment Allowance?
No. If you claim the Annual Investment Allowance on new asset purchases, those assets are fully deducted in the year of purchase and never enter the main pool. The AIA limit stays at £1 million for 2026/27. The WDA cut only affects assets already sitting in your main pool — typically older assets still being written down from prior years, or those that cannot qualify for AIA, such as cars.
What is the special rate pool and is it affected by the April 2026 change?
The special rate pool covers integral building features (heating, electrical systems, air conditioning, water systems), long-life assets with a useful life over 25 years, and higher-emission cars. Its WDA rate stays at 6% and is unchanged by the April 2026 legislation. Only the main rate pool drops from 18% to 14%. If you have fitted out a studio or rented office with integral features, those assets sit in the special rate pool and are not affected by this change.
What is the new 40% first-year allowance introduced in 2026?
From 1 January 2026, a new 40% first-year allowance applies to qualifying main rate plant and machinery where the AIA or full expensing cannot be used. The most relevant scenarios for agency directors are: assets purchased for leasing (excluded from full expensing), and expenditure that exceeds the £1 million AIA limit. Second-hand assets, cars, and overseas leasing are excluded. The 40% FYA gives better first-year relief than the 14% WDA rate and is designed to partly offset the impact of the WDA reduction.
How does the hybrid rate work if my accounting period spans 1 April 2026?
If your company's accounting period crosses 1 April 2026, you apply a blended WDA rate to the main pool for that period. The rate is calculated by weighting 18% for the proportion of the period before 1 April 2026 and 14% for the proportion on or after. For example, a company with a 31 December year-end would use 18% for three months and 14% for nine months, giving an effective rate of approximately 15% for that accounting period. From the following year, 14% applies in full. Your accounting software may need to be updated to handle this calculation correctly.