How long will it take to claim my capital allowances?

by admin on February 4, 2013

How long will it take to claim my capital allowances?

A common misconception about capital allowances is that it takes a very long time to reclaim your money, sometimes more than a decade. This is however somewhat misleading; the rate at which you reclaim your money is much higher in the first years. This means that typically you could have collected almost half of your claim in the first three tax years (which can work out at little over a year in terms of real years – so long as the timing is right (e.g. if it is January 2013 you can still collect for the tax year 2011 – 2012, then in February 2013 you collect for the tax year 2012 – 2013 and in February 2014 you collect for the tax year 2013 – 2014.

The falling rate of return is the reason that it takes so long to claim the whole 100%. However, for the last few years the remaining claim will be relatively insignificant.

An Example

Say you have a grand total of £15,000 to claim back and for the sake of simplicity that the first tax year being claimed in was 2012 -2013 – so the writing down allowance is 18% -down from the previous rate of 20% (this means that you can collect 18% of your total remaining claim every year – which is why there is a decreasing rate of return in relation to your original total claim).


The table shows how significant the first years are when claiming; by tax year three you have claimed £6729 – 45% of you original claim. By year eight you will have claimed 80%! The remaining 20% will then take a further seven years (the upturn at the very end is because once the remaining total claim drops to below £1,000 you can collect it all in one go; this is to prevent the claim from dragging on forever).

The graph and chart below give a clearer and more intuitive picture of how the total you receive builds up and particularly how much can be claimed in the first few years.

Each slice of the chart illustrates what percentage of your original claim you get each year – by year four you would have over half your money.

The chart shows much the same thing but in a different way; the cumulative value of your reclaimed money as it increases from year to year with the biggest amounts coming in the early years.



In conclusion, if someone were to tell you ‘it takes forever to claim capital allowances – it’s barely worth it’ then they are missing the point; it might take over a decade to reach the full 100% but the vast majority of your claim would be made good within just a few years.




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