EIM36910 - Deductions from earnings: capital allowances: example: first year allowance
This example shows how first year allowance is calculated in a straightforward case.
On 6 June 2004, an employee starts a new job in Exeter and has to spend £600 on a word processor in order to perform its duties. The word processor is used solely for work. As the expenditure was incurred in a qualifying period (see EIM36630) the employee claims capital allowances as follows:
|
£ |
||
| 2004/05 | Cost | 600 |
| First year allowance 50% of £600 = | 300 | |
| Residual value carried forward | 300 | |
| 2005/06 | Writing down allowance 25% of £300 = | 75 |
| Residual value carried forward | 225 |
Note that the full 50% first year allowance is due even though
the employee started the job part way through the tax year (see
EIM36610).
But if the employee had used the word processor partly for
non-business purposes a private use adjustment would have been
necessary (see
EIM36570).
