Tools & Equipment — United Kingdom Tax Rules

Claim the cost of tools, machinery, and specialist equipment used in your trade.

Claimable: Fully claimable · Tax authority: HMRC

HMRC Rules

• Tools and equipment used in your trade are deductible via Annual Investment Allowance (AIA) or direct expense under cash basis.
• Small tools and consumables (drill bits, sandpaper, solder) can be expensed directly as revenue costs.
• Larger items qualify for the AIA — claim the full cost in the year of purchase (limit £1,000,000 for 2024/25).
• If equipment has personal use, claim only the business proportion of the cost.
• Hire or lease costs for equipment are deductible as revenue expenses in the period they are paid.
• Repairs and servicing of tools and equipment are also deductible as revenue expenses.

Limits

AIA limit: £1,000,000/year for 2024/25. Small tools under £500 can typically be expensed directly even on the accruals basis. No practical cap for typical sole trader equipment needs.

Worked Example

Mark is a self-employed electrician. He buys £300 of hand tools, a £1,800 multifunction electrical tester (claimed via AIA at 100%), and hires a specialist cable drum for £50/day for 10 days. He claims: £300 + £1,800 + £500 = £2,600 in the 2024/25 tax year.

Record Keeping

• Keep purchase receipts for all tools and equipment
• Record hire agreements and rental invoices
• Note the business-use percentage for any dual-use items
• For items over £1,000, confirm they qualify for AIA and note the purchase date
• Record disposal proceeds if equipment is later sold

Frequently Asked Questions

Can I claim a camera for my photography business?

Yes. Professional equipment directly used in your business is fully deductible via AIA. If the camera is also used for personal photography, claim the business proportion only. Keep your purchase receipt and note your estimated business-use percentage.

What about renting equipment instead of buying?

Rental and hire costs are fully deductible as revenue expenses in the year paid. No capital allowances calculation is needed — just expense the hire charges directly. This applies to plant hire, equipment rental, and specialist tool hire.

Can I claim power tools for my construction business?

Yes. All tools required for your trade are deductible. Small consumable tools (under £500) can be expensed directly; larger tools use the AIA. Keep receipts from trade suppliers (Screwfix, Toolstation, Wickes) and note the business purpose.

What happens if I sell a tool or piece of equipment I've claimed AIA on?

If you sell equipment you've claimed AIA on, the disposal proceeds may create a 'balancing charge' — effectively, HMRC claws back some of the deduction. Keep records of sale proceeds for any equipment previously claimed through capital allowances.