Calculate the depreciation of laptops, desktops, servers, networking equipment and software using straight-line, declining balance and HMRC capital allowance methods — updated with April 2026 WDA rate changes and the new 40% First Year Allowance for IT assets.
IT assets depreciate rapidly in value — and the UK has two distinct sets of rules for accounting depreciation and HMRC tax depreciation (capital allowances).
For accounting and financial reporting purposes, UK businesses typically depreciate computer hardware over 3–5 years using straight-line or declining balance methods. A laptop costing £1,200 with a 3-year useful life and £0 residual value would be depreciated at £400 per year straight-line. Servers and networking infrastructure are typically depreciated over 4–6 years. This depreciation appears in your profit and loss account and reduces your accounting profit, but it is added back and replaced by HMRC's own capital allowance rules when calculating taxable profit for Corporation Tax or Income Tax.
For HMRC tax purposes, computers and IT equipment qualify as plant and machinery and can claim the Annual Investment Allowance (AIA) at 100% up to £1,000,000 per year — meaning most UK SMEs can deduct the full cost of all IT equipment in the year of purchase for tax purposes. If expenditure exceeds the AIA limit, the remaining balance goes into the main rate pool and claims Writing Down Allowances at 14% per year from April 2026 (down from 18%). A new 40% First Year Allowance for new main-rate plant and machinery — including computers — also applies from 1 January 2026 for businesses whose IT spend exceeds their remaining AIA capacity.
Software costs are treated differently. Off-the-shelf software licences and annual subscriptions are typically deducted as revenue expenses in the year they are incurred. Bespoke software developed in-house or by contractors may be treated as a capital intangible asset, with tax relief under the Corporate Intangibles regime (amortisation-linked relief or fixed rate election). In some cases, a business can elect to treat capitalised software as a qualifying plant and machinery asset and claim AIA or WDA instead — the election depends on whether the expenditure would be treated as capital for accounting purposes. Use the HMRC Tax Relief Calculator tab below for a full capital allowance analysis on your IT assets.
Four tools: accounting depreciation schedules (straight-line and declining balance), HMRC capital allowances for IT, and a multi-asset IT fleet depreciation planner.
Straight-line depreciation spreads the cost of an IT asset evenly over its useful life. Best for desktops, workstations and stable infrastructure with predictable use patterns.
Declining balance (reducing balance) depreciation charges more in early years — better reflecting how IT equipment loses value fastest when new. The double-declining method (2× straight-line rate) is widely used for rapidly evolving tech assets like laptops and networking gear.
For UK tax purposes, computers and IT equipment qualify as plant & machinery. Most SME IT spend is fully covered by the Annual Investment Allowance (AIA) at 100%. Spend above the AIA limit uses WDA at 14%/yr from April 2026 or the new 40% First Year Allowance (from January 2026).
Plan the depreciation of your full IT fleet — add up to 6 asset types, set costs and useful lives, and see your combined annual straight-line depreciation charge and total fleet value over time.
Standard useful life estimates and typical accounting depreciation rates for common IT assets used by UK businesses.
| IT Asset Type | Typical Useful Life | Straight-Line Rate | Declining Balance Rate | HMRC Treatment |
|---|---|---|---|---|
| Laptop / Notebook | 3 years | 33%/yr | ~40%/yr | AIA 100% (or 14% WDA) |
| Tablet / iPad | 3 years | 33%/yr | ~40%/yr | AIA 100% (or 14% WDA) |
| Desktop PC / Workstation | 4 years | 25%/yr | ~33%/yr | AIA 100% (or 14% WDA) |
| Server / NAS Storage | 5 years | 20%/yr | ~25%/yr | AIA 100% (or 14% WDA) |
| Networking — Router / Switch / Firewall | 4 years | 25%/yr | ~33%/yr | AIA 100% (or 14% WDA) |
| Printer / MFD / Copier | 3–4 years | 25–33%/yr | ~25%/yr | AIA 100% (or 14% WDA) |
| Smartphone / Business Mobile | 2–3 years | 33–50%/yr | ~40%/yr | AIA 100% (or 14% WDA) |
| Phone System / PBX / VoIP | 5 years | 20%/yr | ~20%/yr | AIA 100% (or 14% WDA) |
| CCTV / Security System | 5 years | 20%/yr | ~20%/yr | AIA 100% (or 14% WDA) |
| AV / Presentation Equipment | 3–5 years | 20–33%/yr | ~25%/yr | AIA 100% (or 14% WDA) |
| Software Licences (off-the-shelf) | 1–3 years | Revenue expense | Revenue expense | Revenue deduction (P&L) |
| Bespoke / Capitalised Software | 3–5 years | 20–33%/yr | — | Intangibles regime / AIA election |
* Useful life estimates reflect typical UK business practice. HMRC capital allowances (AIA / WDA) are separate from accounting depreciation and apply only to taxable profit calculations. Always confirm HMRC treatment of specific software and bespoke IT systems with a qualified accountant.
Essential rates and rules for UK businesses buying computers, IT equipment and software in 2026.
Computers and IT assets qualify for AIA at 100% up to £1,000,000 per year — giving full tax relief in the year of purchase for virtually all UK SME IT budgets.
Main rate WDA reduces from 18% to 14% from April 2026. Applies to IT assets above the AIA limit — slower relief than before for larger IT investments in the WDA pool.
New 40% First Year Allowance for new main-rate plant & machinery — including new computers and IT — from 1 January 2026. Front-loads relief where AIA is exhausted.
Most UK businesses depreciate laptops and mobile devices over 3 years in their accounts. Servers and infrastructure typically use 4–5 years.
Off-the-shelf software licences and subscriptions are usually deducted as revenue expenses in full in the year incurred — no capital allowance needed.
Main CT rate is 25% (profits over £250,000). On a £10,000 server claimed under AIA, the tax saving is £2,500 in year one at the 25% rate.
Four tools for four different IT depreciation scenarios — choose the right one for your needs.
Use the Straight-Line tab for accounting and financial reporting depreciation — spreading cost evenly over useful life. Best for desktops, workstations, servers and stable infrastructure. Required for preparing management accounts and statutory financial statements.
Use the Declining Balance tab for assets that lose value fastest when new — particularly laptops, mobile devices and networking gear. The accelerated method better reflects real-world IT market value and is commonly used in management accounts for high-tech environments.
Use the HMRC Capital Allowances tab to calculate your actual tax relief on IT purchases — separate from accounting depreciation. Enter the asset cost, any AIA already used this year, and choose the appropriate allowance method. This shows your real Corporation Tax or Income Tax saving.
Use the IT Fleet Planner for a full refresh or deployment — enter up to 6 asset types with their total costs and lives to see combined annual depreciation, total fleet value over time and total tax saving from AIA. Ideal for annual IT budgets and asset register planning.
Straight-line, declining balance and HMRC capital allowances — when to use each one for UK IT assets.
Further resources for UK businesses managing IT asset depreciation and capital allowances in 2026.
Common questions about IT equipment depreciation and HMRC capital allowances for UK businesses in 2026.