Can I Claim Tools and Equipment as a Business Expense?
Yes - tools and equipment for your trade are fully deductible.
What HMRC Says
Tools, equipment, and machinery used for business are allowable. Large items may be capital assets eligible for capital allowances.
When You Can Claim
- Hand tools and power tools
- Professional equipment
- Machinery for your trade
- Safety equipment
When You Cannot Claim
- Tools for personal hobbies
- DIY equipment for home
Good to Know
Capital Allowance: 100% Annual Investment Allowance on qualifying equipment
Understanding Tools and Equipment Expenses
Tools and equipment used in your trade are fully deductible business expenses for UK limited companies. This is one of the broadest expense categories, covering everything from a £5 screwdriver to a £100,000 piece of industrial machinery. The tax treatment is generous: under the Annual Investment Allowance (AIA), which stands at £1,000,000 for 2025/26, your company can deduct the full cost of qualifying equipment in the year of purchase.
The AIA applies to "plant and machinery," which HMRC defines broadly to include tools, equipment, machines, vehicles, computers, office furniture, and most physical assets used in your trade. Hand tools, power tools, testing equipment, diagnostic devices, manufacturing equipment, kitchen equipment for catering businesses, camera gear for photographers, and musical instruments for performers all qualify. The key test is that the item is used in the course of your company's trade.
For items costing under a few hundred pounds, most accountants simply treat them as revenue expenses rather than capitalising them and claiming AIA. The practical effect is the same - full deduction in year one - but the accounting is simpler. There is no formal threshold below which items must be expensed rather than capitalised. It is a matter of materiality and your accountant's judgement.
The personal use boundary applies as with all business expenses. Tools used wholly for your trade are 100% deductible. If you buy a power drill through your company but primarily use it for home DIY, it is not a legitimate business expense. If the tool has genuine mixed use, you should apportion the cost, though for modest items HMRC is pragmatic about incidental personal use.
VAT-registered companies reclaim the input VAT on tool and equipment purchases. For high-value equipment, this represents a significant cash flow advantage. A £10,000 piece of equipment includes £1,666.67 of VAT that you recover on your next return. Always obtain a proper VAT invoice, particularly when buying from trade suppliers, auctions, or second-hand dealers where VAT documentation can be less standardised.
Real-World Examples
Electrician purchasing trade tools
An electrician operating through a limited company spends £2,500 on a Fluke multimeter, cable testers, crimping tools, and a cordless drill set. All items are fully deductible as tools of his trade. The company reclaims £416.67 in VAT. He keeps the receipts filed by job for his records.
Photographer investing in camera equipment
A commercial photographer buys a new camera body for £3,200 and a lens for £1,800 through her limited company. The £5,000 total qualifies for AIA and is fully deducted from profits in the current year, saving £1,250 in Corporation Tax. The equipment is essential to her trade.
Catering company purchasing kitchen equipment
A catering company buys a commercial oven for £4,500, a food processor for £800, and assorted catering pans and utensils for £600. The total spend of £5,900 qualifies for AIA. All items are used in the company's catering operations and are core trade assets.
Replacing worn-out tools
A plumber replaces several worn-out pipe wrenches, a drain camera, and a soldering torch at a total cost of £850. Replacement tools are treated exactly like new tools: fully deductible in the year of purchase. There is no requirement to match the replacement cost against the original cost of the old tools.
Common Mistakes to Avoid
- Not claiming tools because you assume only large capital purchases qualify. Even a £10 tool is a deductible business expense. The amount does not matter - if it is used for your trade, claim it.
- Buying tools through personal accounts and never submitting expense claims to the company. Tradespeople commonly buy tools out of pocket. Submit a proper expense claim so the company gets the tax deduction and reimburses you.
- Claiming tools used exclusively for personal hobbies or home improvements. A circular saw used for your carpentry business is fine. The same saw used only for weekend DIY is not a business expense.
- Not keeping receipts for tools bought from trade counters or markets. HMRC requires supporting records for all expenses. If you pay cash, get a receipt at the point of purchase. No receipt means no verifiable claim.
Frequently Asked Questions
Is there a price limit on tools I can claim through my company?
No. The AIA allows your company to deduct the full cost of qualifying tools and equipment up to £1,000,000 per year. A £20 hammer and a £50,000 CNC machine are both fully deductible in the year of purchase. For most small companies, you will never approach the AIA limit.
Can I claim second-hand tools bought from another tradesperson?
Yes. Second-hand tools and equipment are deductible at the price you pay. The items do not need to be new. However, you may not be able to reclaim VAT on second-hand purchases unless the seller is VAT-registered and provides a VAT invoice. Private sales between individuals typically do not include VAT.
Do I need to keep a list of all my company tools?
While there is no legal requirement to maintain a formal asset register for small tools, it is good practice. For items over a few hundred pounds, recording them as fixed assets in your accounts creates a clear record. For smaller items expensed as revenue costs, the purchase receipts are your primary records.
Can I claim safety equipment like PPE through my company?
Yes. Personal protective equipment including hard hats, safety boots, high-visibility clothing, goggles, gloves, and ear protection are all deductible business expenses. Employers have a legal obligation to provide PPE, so these are not just deductible but required for compliance.
What happens when I sell or dispose of company equipment?
If you claimed AIA on equipment and later sell it, the sale proceeds are added back to your capital allowances computation as a balancing charge. This effectively recaptures some of the tax relief you received. If you scrap equipment with no proceeds, there is no balancing charge. Keep records of disposals.
Source: HMRC Capital Allowances Manual CA20000 - Annual Investment Allowance; CA23000 - Plant and machinery qualifying expenditure
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