Calculate goodwill amortisation under UK GAAP, build a year-by-year carrying value schedule, compare impairment scenarios and estimate Corporation Tax relief using the current UK goodwill and relevant asset rules.
Use the first tab for a clean FRS 102 amortisation schedule, the second for HMRC goodwill relief, and the third to compare amortisation with a one-off impairment.
Calculate annual goodwill amortisation, monthly charge, cumulative amortisation and closing carrying value. This is designed for UK GAAP planning and management accounts, not as formal accounting advice.
Model the fixed-rate goodwill/relevant asset relief that may apply to eligible business acquisitions made on or after 1 April 2019. Relief is limited by the qualifying IP rule, so this tab asks for qualifying IP cost.
Compare normal straight-line amortisation with an impairment event. This helps show how a sudden fall in recoverable amount can move expense into one year and reduce later carrying values.
Goodwill arises when a company buys a business for more than the fair value of the identifiable net assets acquired. In simple terms, it is the value paid for reputation, customer loyalty, trained workforce, location advantages, future earnings, synergies and other benefits that cannot always be separately recognised as an individual intangible asset. Under UK GAAP, goodwill is not left on the balance sheet forever. It is written down through amortisation over the period in which the acquired business is expected to generate economic benefit.
For most UK companies using FRS 102, goodwill has a finite useful life. Management should estimate that life based on evidence: customer churn, contract length, industry stability, brand durability, expected integration period and the reason the buyer was willing to pay a premium. A small professional practice with personal customer relationships might support a shorter life, such as 5 years. A long-established trading business with recurring revenue, strong local reputation and stable customer contracts might support 10 years or more. If the useful life cannot be estimated reliably, the FRS 102 fallback is a maximum of 10 years.
The amortisation charge reduces profit in the accounts, reduces the goodwill carrying amount on the balance sheet and builds up accumulated amortisation. It is separate from impairment. Amortisation is planned and systematic; impairment is an additional write-down when the acquired business is not performing as expected or when there is evidence that the carrying value is no longer recoverable. This calculator includes both so that finance teams, accountants and business owners can test the effect of different assumptions before finalising accounts.
Use this simple workflow before you decide the annual charge or publish management accounts.
Start with the purchase price, then deduct the fair value of identifiable net assets. Check whether customer lists, brands, software or contracts should be recognised separately from goodwill.
Estimate how long the acquired benefits will last. Use evidence, not convenience. If a reliable estimate cannot be made under FRS 102, cap the life at 10 years.
Use straight-line amortisation unless another pattern better reflects economic benefits. The annual charge is usually goodwill divided by the useful life.
Check for lost contracts, weak trading, integration problems, lower forecasts or market changes. If indicators exist, test recoverable amount and record any extra write-down.
A common mistake is assuming that the goodwill amortisation charge in the accounts automatically equals the Corporation Tax deduction. That is sometimes true for intangible assets inside the corporate intangibles regime, but goodwill has had several rule changes. For acquisitions after 1 April 2019, goodwill and other “relevant assets” may qualify for relief only when they are purchased with a business that includes qualifying intellectual property. Even then, the relief is normally a fixed 6.5% per year on the lower of the relevant asset cost or six times the qualifying IP cost.
This means a company can show a £60,000 annual accounting amortisation charge but receive a different tax deduction. If the goodwill cost is £600,000 and qualifying IP is £80,000, the relief cap is 6 × £80,000 = £480,000. The annual fixed-rate debit would be 6.5% of £480,000, or £31,200. At a 25% Corporation Tax rate, that gives an estimated tax saving of £7,800 for the year. If there is no qualifying IP, goodwill relief may be restricted and the tax benefit might only arise on a later realisation.
| Item | Calculation | Result |
|---|---|---|
| Accounts amortisation | £600,000 ÷ 10 years | £60,000 per year |
| Monthly management charge | £60,000 ÷ 12 | £5,000 per month |
| Qualifying IP cap example | £80,000 IP × 6 | £480,000 relief base |
| Fixed-rate tax debit | £480,000 × 6.5% | £31,200 per year |
| Tax saving at 25% | £31,200 × 25% | £7,800 |
Indicative planning ranges for UK accounts. Your final policy should be based on evidence and reviewed with a qualified adviser.
| Asset type | Typical useful life | Common method | Planning notes |
|---|---|---|---|
| Goodwill — owner-managed trade | 5–10 years | Straight-line | Shorter lives often fit businesses where customer relationships depend heavily on former owners. |
| Goodwill — stable recurring revenue | 7–10 years+ | Straight-line | A longer period may be supportable where contracts, brand and retention data justify it. |
| Customer lists and contracts | 3–10 years | Straight-line or churn pattern | Match the expected retention period and renewal behaviour. |
| Brands and trademarks | 5–10 years+ | Straight-line | Evidence should support the life, including legal protection and market durability. |
| Non-compete agreements | Contract term | Straight-line | Usually amortised over the enforceable agreement period. |
| Capitalised software | 3–5 years | Straight-line | Technology changes quickly, so shorter lives are common. |
| Website or platform development | 2–5 years | Straight-line | Only capitalise where recognition criteria are met; marketing content is usually expensed. |
These factors help support the useful life, impairment review and tax planning assumptions.
Management should document why the selected life is reasonable. Useful evidence includes customer retention history, length of contracts, market position, expected integration period and how long acquired earnings are expected to continue.
If revenue, margins or cash flows fall below the acquisition case, goodwill may need an impairment review. Amortisation continues, but impairment can bring a larger expense into the year of the trigger.
UK tax relief depends heavily on when the goodwill was acquired, whether the acquisition included qualifying IP, whether the parties were connected and whether special restrictions apply.
Some value paid in a deal may be customer relationships, brands, contracts, software or licences rather than goodwill. Separating them can change both amortisation life and tax modelling.
Accounts should explain the amortisation method and period clearly. A generic “goodwill over 10 years” note is weak unless it matches the actual economics of the acquisition.
Amortisation is a non-cash accounting charge. It affects profit and carrying value, while any tax relief affects cash only through a lower Corporation Tax payment.
Using 10 years automatically. Ten years is common, but it is not a magic default for every acquisition. If management can make a reliable estimate, the useful life should reflect that estimate. A business bought mainly for short-term customer introductions may need a shorter life. A highly stable business with recurring subscriptions may support a longer evidence-based life.
Ignoring identifiable intangibles. Goodwill is the residual after separately identifiable assets are valued. Customer lists, brands, non-compete rights, licences and technology may need to be recognised separately. That can make the goodwill figure smaller and create different amortisation periods for different assets.
Confusing impairment with amortisation. Amortisation is routine. Impairment is triggered by evidence that the carrying amount may not be recoverable. If a key contract is lost, the acquired business underperforms or forecasts drop, an impairment review may be needed even if the normal amortisation schedule is still being followed.
Assuming the tax deduction equals the accounts charge. For goodwill and relevant assets, UK tax relief may be restricted. Post-2019 relief often uses the 6.5% fixed-rate mechanism and the qualifying IP cap. Always check the acquisition date, transaction structure and whether the asset falls within the rules before relying on the tax output.
Useful internal pages and official sources to support goodwill, intangibles and UK business tax planning.
Answers to common 2026 questions about FRS 102 goodwill, amortisation, impairment and Corporation Tax relief.