If you own a marketing agency, digital agency, or creative agency, you have likely spent money on computers, office furniture, software, or leasehold improvements. Those costs do not simply disappear in your accounts. Through capital allowances, you can claim tax relief on them. But the rates at which you claim that relief have changed.
Writing down allowance rates determine how much of your capital expenditure you can deduct from your profits each year. From April 2026, the main rate dropped from 18% to 14%, and the special rate pool fell from 6% to 4% [1][2]. If you are planning a significant equipment purchase or a studio fit-out, these changes matter.
This article covers what writing down allowances are, how the rates work, what qualifies for each pool, and what the recent changes mean for your agency. As ICAEW qualified accountants working exclusively with agency founders, we see these rules misapplied more often than you would expect. Let us fix that.
What Are Writing Down Allowances?
Writing down allowances (WDAs) are a type of capital allowance. They let you claim tax relief on the depreciation of plant and machinery over time. Instead of deducting the full cost in one year (which you can do with the Annual Investment Allowance up to £1 million), WDAs spread the relief across multiple years [1].
You claim WDAs when an asset does not qualify for another allowance, or when there is value remaining after claiming the maximum amount of another allowance [3]. For example, if you buy a server for £20,000 and claim £10,000 of Annual Investment Allowance, the remaining £10,000 goes into your main pool and attracts WDAs at the relevant rate.
Think of it as the default mechanism. If you cannot use a first-year allowance or the AIA, WDAs are what you fall back on.
The Two Pools: Main Rate and Special Rate
HMRC splits plant and machinery into two pools. Each pool has its own writing down allowance rate.
Main Rate Pool (18% before April 2026, 14% from April 2026)
The main rate pool covers most plant and machinery. For a typical agency, this includes:
- Computers, laptops, and monitors
- Office furniture (desks, chairs, shelving)
- Servers and networking equipment
- Tools and equipment used directly in your business
- Fixtures and fittings that are not integral to the building
Before 1 April 2026 (for Corporation Tax) and 6 April 2026 (for Income Tax), the main rate was 18%. It is now 14% [1]. That means you claim 14% of the pool value each year on a reducing balance basis.
Special Rate Pool (6% before April 2026, 4% from April 2026)
The special rate pool covers assets with a longer useful life or those considered integral to a building. This includes:
- Integral features: lifts, escalators, air conditioning, heating systems, electrical systems, water systems
- Long-life assets: items with an expected useful life of 25 years or more, where the total cost of such items in an accounting period exceeds £100,000 [1]
- Thermal insulation added to an existing building
- Solar panels
The special rate was 6% before April 2026. It dropped to 4% from April 2026 [2].
If the value of all long-life items you buy in an accounting period is more than £100,000, put the costs in the special rate pool. If it totals £100,000 or less, put the costs in the main rate pool unless there is another factor that would qualify it as special rate [1].
How the Rates Changed in 2026
The government announced the rate changes in the Spring Statement 2022, intending to increase the main rate from 18% to 20% and the special rate from 6% to 8% [4]. That did not happen. Instead, from April 2026, the main rate dropped to 14% and the special rate dropped to 4% [1][2].
Here is the summary:
| Pool | Rate before April 2026 | Rate from April 2026 |
|---|---|---|
| Main rate pool | 18% | 14% |
| Special rate pool | 6% | 4% |
For Corporation Tax, the change took effect on 1 April 2026. For Income Tax (sole traders and partnerships), it took effect on 6 April 2026 [1].
The Annual Investment Allowance remains at £1 million for 2026/27, and the 100% first-year allowance for zero-emission cars and goods vehicles also continues [2]. So for most agency equipment purchases, you will still use the AIA first and only fall back on WDAs for the balance.
What This Means for Your Agency
If your agency has a large pool of existing assets, the rate drop means you will claim tax relief more slowly on those assets going forward. That is not necessarily bad news if you are planning significant new investment, because the AIA still covers the first £1 million of qualifying expenditure.
But there are two scenarios where the rate change bites.
Scenario 1: You have a large pool balance with no new purchases. If your agency bought heavily in previous years and is now in a quieter investment phase, your pool balance may be substantial. At 18%, that pool would have reduced relatively quickly. At 14%, it takes longer. Your tax relief is spread over more years.
Scenario 2: You are buying integral features for a studio or office fit-out. If you are renovating a space in Shoreditch or Bristol Harbourside, you might spend £150,000 on air conditioning, lighting, and electrical systems. Those are special rate assets. At 6%, you would have claimed £9,000 in year one. At 4%, you claim £6,000. The difference is £3,000 of tax relief lost in the first year.
For a 12-person digital agency billing £800k per year, that £3,000 difference is not catastrophic. But it adds up over the life of the asset.
Structures and Buildings Allowance
Separate from plant and machinery, you can claim the Structures and Buildings Allowance (SBA) on the cost of buying, constructing, or renovating non-residential buildings. The rate is 3% per year on a straight-line basis [1][4]. That means you claim 3% of the cost each year for 33.3 years.
This applies if you buy a freehold office or invest in a significant leasehold renovation. It is not a writing down allowance in the strict sense, but it is another capital allowance worth knowing about.
Practical Steps for Agency Founders
Here is what you should do now.
1. Review your fixed asset register
Make sure every asset is in the correct pool. We see agencies put integral features in the main pool by mistake. That overstates your relief in the short term but creates a compliance risk if HMRC reviews your return.
2. Plan your capital expenditure timing
If you are planning a large purchase, consider whether it makes sense to buy before your year end to maximise AIA usage. The AIA is still £1 million, so most agency purchases will be fully relieved in the year of purchase.
3. Check your pool balances at year end
Your accountant should calculate the WDA on your pool balance each year. If you have a significant balance, ask them to model the impact of the rate change on your future tax position.
4. Consider a capital allowances review for property
If you own your office or have spent heavily on a leasehold fit-out, a specialist capital allowances surveyor can identify embedded plant and machinery that qualifies for relief. This is common for agencies in Manchester Northern Quarter or Soho who have converted old buildings into studios.
Common Mistakes Agency Founders Make
Mistake 1: Claiming WDAs on assets that qualify for AIA. If you buy a £5,000 computer, claim the full cost under AIA. Do not put it in the pool. The AIA gives 100% relief in year one. WDAs give partial relief over many years.
Mistake 2: Ignoring the special rate pool. Integral features are easy to miss. If your landlord installed air conditioning and you reimbursed them, that cost may qualify as special rate plant and machinery.
Mistake 3: Forgetting about long-life assets. If you buy a piece of equipment that lasts 25+ years and the total cost of such items in the year exceeds £100,000, it goes in the special rate pool. This is rare for most agencies but relevant for specialist equipment in production or design studios.
How We Help Agency Founders
At Agency Founder Finance, we are ICAEW qualified accountants who work exclusively with agency founders. We handle capital allowances as part of your annual tax compliance and year-end planning. If your asset register is a mess or you are unsure which pool an asset belongs to, we can sort it out.
We also help with broader tax and compliance for agencies, including corporation tax returns, VAT, and payroll. If you are thinking about a studio fit-out or a significant equipment purchase, talk to us before you spend the money. The timing and structure of the purchase affect your tax relief.
For more on how we work with agencies like yours, see our agency services page or read our tax and compliance blog.
Final Thoughts
Writing down allowance rates have changed. The main rate is now 14%, and the special rate is 4%. For most agency founders, the impact is manageable because the AIA still covers the first £1 million of qualifying expenditure. But if you have a large pool balance or are investing in integral features, the rate drop will slow your tax relief.
Review your fixed asset register. Check your pool classifications. And if you are planning capital expenditure, factor the new rates into your cash flow projections.
If your contractor mix has changed in the last 12 months, or if you are planning a significant equipment purchase, ask your accountant before year-end. A quick review now can save you thousands in missed relief later.
Contact us at Agency Founder Finance if you want to discuss your agency's capital allowances position.
Sources
- gov.uk: Work out your writing down allowances: Rates and pools - GOV.UK
- icaew.com: Winners and losers from capital allowances changes - ICAEW.com
- aka.hmrc.gov.uk: Claim capital allowances: Overview - GOV.UK
- accaglobal.com: Maximising capital allowances relief - ACCA Global