Calculate depreciation for CNC machines, lathes, forklifts, factory equipment, workshop tools and industrial plant. Compare straight-line depreciation, reducing balance depreciation, Annual Investment Allowance, full expensing, 40% first-year allowance and HMRC writing down allowances.
Machinery depreciation is more than an accounting entry. It affects pricing, cash flow, replacement planning and tax relief.
UK manufacturing, engineering and workshop businesses often invest large amounts in CNC machines, turning centres, milling machines, laser cutters, forklifts, compressors, packaging equipment, production lines, inspection tools and other plant and machinery. These assets usually stay in the business for several years, but their value and efficiency decline as they age, wear out, become less productive or are overtaken by newer technology.
This machinery depreciation calculator UK page helps you estimate the annual cost of using equipment in your business. The accounting depreciation schedule can be used for management accounts, profit planning, pricing decisions, asset registers and replacement budgets. The HMRC capital allowances calculator shows how tax relief may be claimed through Annual Investment Allowance, full expensing, 40% first-year allowance or writing down allowances.
It is important to keep accounting depreciation and tax relief separate. Depreciation is the charge shown in the accounts to spread the cost of machinery over its useful life. Capital allowances are the tax rules that decide how much of the machinery cost can reduce taxable profits. A business might depreciate a CNC machine over eight years in the accounts but claim 100% AIA or full expensing for tax in the year of purchase.
For many smaller businesses, the £1m Annual Investment Allowance covers most qualifying machinery purchases. Larger manufacturers, leasing businesses and companies investing beyond the AIA limit may need to compare full expensing, 40% first-year allowance, main pool WDA and special rate pool WDA. That comparison can materially affect cash flow, Corporation Tax timing and return on investment.
Use the tabs below to calculate accounting depreciation, reducing balance depreciation and HMRC capital allowance schedules for UK plant and machinery.
These are the key reliefs UK manufacturers and engineering businesses normally compare when buying plant and machinery.
AIA gives 100% relief on qualifying plant and machinery up to the annual £1m limit. It can apply to both new and second-hand machinery, but not cars.
Companies can claim full expensing on qualifying new and unused main-rate plant and machinery. This is valuable for larger machinery investments above the AIA limit.
The 40% FYA applies to qualifying new main-rate plant and machinery from 1 January 2026 where the conditions are met.
Main pool writing down allowance applies to many assets such as CNC machines, workshop tools, compressors, manufacturing equipment and forklifts.
Special rate pool can apply to long-life assets, integral features and certain heavy plant. Relief is slower because the annual WDA rate is lower.
The cash value of relief depends on your tax rate. A £50,000 allowance at 25% Corporation Tax gives an estimated £12,500 tax saving.
These are planning ranges only. Your actual useful life should reflect usage, maintenance, technology risk and resale market.
CNC machine depreciation depends on spindle hours, software, accuracy, tooling, maintenance and resale demand. Many businesses use straight-line depreciation for accounts and AIA, full expensing or main pool WDA for tax.
Forklifts can depreciate quickly where they run long shifts or operate in tough environments. Battery condition, service history and safety compliance affect residual value.
Air compressors, extraction systems, welding equipment and workshop tools are often treated as plant and machinery. Maintenance records help support useful life estimates.
Automation equipment can become obsolete faster than traditional mechanical machinery. Reducing balance depreciation may better reflect early value loss for robotics, sensors and control systems.
Large presses, foundry equipment, heavy fabrication plant and long-life installations may need careful review. Some items may be long-life assets or integral features.
Production tooling can wear out with job volume or become obsolete when contracts change. For accounts, useful life should follow expected production use rather than a generic machinery life.
Machinery depreciation and machinery tax relief are connected, but they are not the same calculation.
| Topic | Accounting Depreciation | Capital Allowances | Why It Matters |
|---|---|---|---|
| Purpose | Shows the cost of using machinery in accounts. | Gives tax relief against taxable profits. | Accounts profit and taxable profit can be different. |
| Method | Straight-line or reducing balance based on useful life. | AIA, full expensing, FYA or WDA pools. | The tax claim may be faster than the accounting charge. |
| Asset tracking | Usually tracked by individual machine in the fixed asset register. | Usually pooled for main pool or special rate pool purposes. | You still need asset records for insurance, accounts and disposal. |
| Residual value | Can be used to estimate book value at end of useful life. | Sale proceeds affect capital allowance pools or disposal treatment. | Resale value matters for cash flow and future tax calculations. |
Follow these steps before buying new plant, upgrading a workshop or replacing industrial equipment.
Classify whether the item is machinery, tooling, commercial vehicle, building fixture, long-life plant or something that needs specialist review.
Base useful life on expected usage, shifts, maintenance, technology risk and resale value rather than copying a fixed rate.
Use straight-line or reducing balance depreciation to forecast profit impact, monthly charges and book value.
Compare AIA, full expensing, 40% FYA and writing down allowance to estimate tax relief timing.
Compare tax saving, finance repayments, maintenance costs and expected productivity gains to assess payback.
Save invoices, delivery notes, commissioning records, asset photos, lease documents and disposal paperwork.
Different depreciation methods suit different types of manufacturing equipment.
Straight-line depreciation spreads the machinery cost evenly across its useful life. It is easy to explain, useful for budgets and common for stable equipment such as lathes, grinders, presses and standard workshop machines.
Reducing balance depreciation gives a higher charge in early years. It can suit high-tech machinery, automation equipment, electronics and assets that lose value quickly when new.
AIA can give immediate tax relief on qualifying plant and machinery. It is often the first relief small and medium-sized manufacturers review before considering WDA or other first-year allowances.
Companies investing in new and unused main-rate plant and machinery may use full expensing where the conditions are met. This can be valuable for larger factory investments.
The 40% FYA can help where other first-year allowances are not available, including some assets used for leasing and some unincorporated businesses.
WDA gives tax relief gradually on a reducing balance. It is commonly used for remaining balances after first-year relief, second-hand assets or assets that do not qualify for faster relief.
Good records make depreciation, insurance, capital allowances and disposal calculations much easier.
| Record | Why It Matters | Useful For |
|---|---|---|
| Supplier invoice | Shows cost, VAT, purchase date and asset description. | Accounts, capital allowances and fixed asset register. |
| Commissioning date | Shows when the machine became available for use. | Depreciation start date and tax period review. |
| Finance or lease agreement | Shows ownership, lease type and payment structure. | Capital allowance treatment and accounting classification. |
| Maintenance records | Supports useful life, condition and resale value assumptions. | Asset impairment review, warranty and disposal planning. |
| Asset photographs and serial numbers | Proves existence, condition and identity of equipment. | Insurance, audit and asset tracking. |
| Disposal documents | Shows sale proceeds, auction fees, scrap value or trade-in allowance. | Capital allowance pool adjustment and accounting disposal entry. |
Use these links to keep visitors moving through your depreciation, capital allowance and business finance content.
Answers to common questions about machinery depreciation, plant and machinery capital allowances, AIA, full expensing and HMRC writing down allowances.