Can You Claim AIA on Second-Hand Assets?

Yes, you can claim the Annual Investment Allowance (AIA) on genuine second-hand plant and machinery bought at arm's length. The asset does not have to be new. What stops a claim is not the fact that an asset has had a previous owner, it is something more specific: you cannot claim AIA on an asset you previously owned privately, on a gift, on a purchase from a connected party, or on plant for use inside a let dwelling-house. Get those four bars right and the second-hand market is open to you.

This matters more than it might seem, because being second-hand-friendly is exactly what makes AIA different from the two newer reliefs. Both full expensing (companies only) and the new 40% first-year allowance (Finance Act 2026) apply only to plant that is unused and not second-hand. So for a used asset, AIA is not just an option, it is usually the only 100% relief available. This guide draws that boundary precisely, fixes the points where landlords most often go wrong, deals with the awkward case where you buy and sell an asset in the same accounting period, and states the position as it stands after Finance Act 2026.

The short answer: when AIA works on a second-hand asset

AIA gives 100% relief on qualifying expenditure on plant and machinery, up to £1,000,000 a year, in the chargeable period the expenditure is incurred (CAA 2001 section 51A). The test for AIA is about whether the asset is qualifying plant and machinery for a qualifying activity. It is not a test of whether the asset is new.

That is the single most important point on this page, and it is where a lot of guidance goes wrong by importing the phrase "unused and not second-hand". That phrase is the full-expensing and 40% first-year-allowance test, not the AIA test (more on that below). For AIA, a second-hand commercial dishwasher bought from an unconnected restaurant supplier qualifies just as readily as a brand-new one.

The restrictions that genuinely bite on used or previously owned assets are the General Exclusions in CAA 2001 section 38B: General Exclusion 2 (cars), General Exclusion 4 (a connected change in trade where obtaining the allowance is the main benefit), and General Exclusion 5 (assets caught by section 13 prior non-qualifying use, or section 14 gifts). Add the dwelling-house bar in section 35 for landlords, and that is the full list of what to watch.

Which capital allowance applies to a second-hand asset?

The table below is the heart of this page. It shows, at a glance, why AIA is the lever for second-hand assets and the others are not.

Allowance	Second-hand allowed?	Who can claim	Rate	Key statute
Annual Investment Allowance	Yes	Individuals, partnerships and companies	100% up to £1m	CAA 2001 s.51A
Full expensing	No (new and unused only)	Companies only	100%	CAA 2001 s.45S
40% first-year allowance	No (new and unused only)	All businesses, the practical route for unincorporated landlords and leasing	40%	FA 2026 s.29 (CAA 2001 s.45U)
Writing down allowance, main pool	Yes (the fallback for excluded or brought-in assets)	All	14% from April 2026	CAA 2001 s.56, FA 2026 s.28
Writing down allowance, special rate pool	Yes	All	6%	CAA 2001 s.104D

Read across the second column: AIA and writing down allowances are the only routes that accept second-hand assets. So if you buy used, your choice is AIA for 100% upfront relief (within the £1m limit), or writing down allowances spreading relief over years if AIA is unavailable or already used up. There is no first-year-allowance shortcut for used plant. For the writing down rates and the hybrid transitional rate, see our writing down allowance rates guide, and for the AIA regime overview see what AIA is in tax.

Second-hand versus previously owned by you

This is the distinction that catches people out. "Second-hand" and "previously owned by you" are not the same thing, and they are treated very differently.

A genuine second-hand asset bought from an unconnected third party is AIA-eligible. You never owned it, so none of the prior-use exclusions apply. You claim AIA on the price you paid.

An asset you previously owned for another (non-qualifying) purpose, then brought into the business, is not AIA-eligible. It is caught by section 38B General Exclusion 5, which is triggered through CAA 2001 section 13. Instead of AIA, the asset is treated as brought in at its market value on the date it starts being used in the business, and that notional expenditure is capped at the original cost you paid for it (section 13 with the deductions in section 218). You then write that value down through the main pool at 14%, not as a 100% AIA deduction.

A worked micro-example. You owned a van privately for a year, then moved it into your property development trade when its market value was £9,000 (you had paid £12,000). You cannot claim AIA. You bring the van in at £9,000 (market value, which is below original cost so it is not capped lower) and claim writing down allowances on it through the main pool at 14% a year. The relief is real, but it is spread out, and it is on the lower figure, which is why timing the move matters.

Gifts work the same way. An asset received as a gift and then brought into the qualifying activity is caught by General Exclusion 5 through CAA 2001 section 14, so AIA is barred and the asset enters the pool at market value.

Buying and disposing of an asset in the same accounting period

One question that surfaces more than you would expect: if I buy a qualifying asset and then dispose of it in the same accounting period, can I still claim AIA on it? The short answer is yes. A same-period disposal does not deny the claim. AIA is claimed on the qualifying expenditure in the chargeable period the expenditure is incurred, and that entitlement crystallises when you incur the cost. Selling the asset afterwards, even days later in the same period, is treated as a separate event.

That separate event is a disposal. Under CAA 2001 section 61, a disposal event (ceasing to own the asset, loss, destruction, the asset starting to be used for a non-qualifying purpose, or the activity ceasing) brings a disposal value into the relevant pool. On an ordinary arm's-length sale, the disposal value is the net proceeds. On a sale to a connected party, or at below market value, section 61 substitutes market value instead, so you cannot understate the disposal value to dodge a clawback.

What the disposal value does is set out in CAA 2001 section 55. Entitlement is worked out separately for each pool by comparing the available qualifying expenditure in the pool against the total of the disposal receipts brought into it. Where available qualifying expenditure exceeds disposal receipts, you get a writing down allowance (or a balancing allowance in a final period). Where the disposal receipts exceed the available qualifying expenditure, the excess is a balancing charge: a taxable receipt that effectively claws back relief already given. A balancing charge is not a penalty, it is simply the mechanism that stops you keeping 100% relief on an asset you no longer own.

So on a same-period buy-and-sell, the AIA claim stands, but the disposal value nets against it and can pull the relief back. The net effect over the period can be small, or even a wash.

A worked example. A property development trade buys a second-hand item of plant for £8,000 and claims £8,000 of AIA, taking the full 100% relief that period. Later in the same period it sells the item to an unconnected buyer for £6,000. That £6,000 is the disposal value brought into the pool. The AIA claim of £8,000 is not undone, but the £6,000 disposal receipt reduces the pool, so the net capital allowances relief for the period is £2,000 (the £8,000 claimed less the £6,000 disposal value). If the sale had instead been to a connected company at an artificially low £1,000, section 61 would substitute the market value of £6,000 as the disposal value, so the connected sale gains nothing. For the full pool and balancing-charge mechanics, see our writing down allowance rates guide.

The connected-party rule

AIA is restricted where an asset comes from a connected party or via a transaction whose main benefit is obtaining the allowance. There are two mechanisms.

First, section 38B General Exclusion 4 denies AIA where plant or machinery is acquired in connection with a change in the nature or conduct of a trade carried on by another person, and obtaining the AIA is the main benefit (or one of the main benefits) reasonably expected from that change. This is the anti-avoidance backbone: it stops you manufacturing allowances by shuffling assets between businesses.

Second, the disposal and valuation mechanics in CAA 2001 section 61 substitute market value as the disposal value on a connected-party or below-market sale, and section 218 caps the buyer's qualifying expenditure by reference to the seller's original cost. The combined effect is that you cannot sell an asset from one of your companies to another and crystallise a fresh £1m AIA on an inflated price.

"Connected" includes companies under common control, close relatives (spouse or civil partner, parents, grandparents, children, grandchildren, brothers and sisters), and partners in a business along with their relatives. The definition is wide on purpose, so an arm's-length-looking transfer between, say, your own SPV and your spouse's is still a connected transaction. This is also why the same-period-disposal point above matters in practice: a connected sale in the period of acquisition has its disposal value lifted to market value under section 61, so you cannot manufacture a low disposal value to keep the relief. If you run several SPVs, the connected-party rule also interacts with the requirement to share a single AIA across related companies. Our guide to the £1m AIA cap and association rules covers the allocation depth.

Cars are out, full stop

Cars are excluded from AIA entirely by section 38B General Exclusion 2 (a car as defined by CAA 2001 section 268A). Second-hand or new makes no difference: a car never qualifies for AIA. Cars instead go into the capital allowances pools, with the main pool at 14% for cars at or below 50 g/km CO2 and the special rate pool at 6% above 50 g/km.

The only car first-year allowance is the 100% allowance for new, unused zero-emission cars (0 g/km) under CAA 2001 section 45D, available to 31 March 2027 for corporation tax and 5 April 2027 for income tax. Note the word new: that allowance does not help with a second-hand electric car either. A van, by contrast, is not a car for this purpose, so a second-hand van can qualify for AIA. For the full car position, see our writing down allowance for cars guide.

The four AIA bars at a glance

Pulling the exclusions together, here is the decision the question really comes down to. Where AIA is barred, the asset is not lost for relief, it simply routes to a writing down allowance instead (except for furnishings inside a let dwelling, which go to a revenue deduction rather than a capital allowance).

Situation	AIA available?	Why	Statute	What applies instead
Genuine second-hand bought at arm's length	Yes	Qualifying plant for a qualifying activity; newness is not the test	s.51A	AIA applies
Asset you previously owned privately, then brought in	No	Prior non-qualifying use	s.38B GE5 via s.13	WDA on market value, capped at original cost (s.218)
Gifted asset brought into the business	No	Received as a gift	s.38B GE5 via s.14	WDA on market value at bring-in
Bought from a connected party	Restricted or no	Anti-avoidance; main-benefit test	s.38B GE4; s.61 and s.218	Market-value disposal, prior-cost cap, then WDA
Car	No	Cars excluded entirely	s.38B GE2 (s.268A)	WDA pool; s.45D FYA only for new 0 g/km cars
Plant inside a let dwelling-house	No	Dwelling-house bar	s.35	Replacement of Domestic Items Relief (a revenue deduction)

The landlord reality: the dwelling-house bar

Here is the point that generic AIA guides miss and that matters most for landlords. CAA 2001 section 35 bars plant and machinery allowances, including AIA, on plant or machinery provided for use in a dwelling-house within an ordinary property business. So a second-hand sofa, bed, fridge, cooker or washing machine for a furnished let does not qualify for AIA. Second-hand or new is irrelevant: the asset is barred because of where it is used.

This is a frequent and expensive mistake. A landlord who claims AIA on a £400 washing machine for a let flat has made a claim HMRC can disallow, with interest and possibly penalties. The correct route for furniture and appliances in a let dwelling is not a capital allowance at all. It is Replacement of Domestic Items Relief, a revenue deduction under ITTOIA 2005 section 311A (or CTA 2009 section 250A for companies). See our Replacement of Domestic Items Relief guide for how that works.

What still qualifies for a property business, despite section 35:

• Common parts of a multi-let block. A communal boiler, a lift, or lighting in a shared hallway is not in a dwelling-house, so plant there can qualify, including AIA on a second-hand unit. Our HMO common-parts guide covers the mechanics.
• Integral features in qualifying non-dwelling areas. Electrical systems, cold and hot water systems, lifts, air conditioning and external solar shading (CAA 2001 section 33A) in commercial units, offices or the communal areas of mixed-use property. These are special-rate items. See our integral features guide.

Where second-hand AIA genuinely helps a property business

Because section 35 closes off in-dwelling plant, the real second-hand AIA opportunities for property businesses are narrow but worth knowing:

• A property development trade. Tools, plant and equipment used in a development or refurbishment trade are not in a dwelling for the purposes of the trade and can qualify for AIA, including second-hand kit bought from an unconnected seller.
• Commercial property. Plant and integral features in commercial units carry the broader claim base. See our commercial property capital allowances guide.
• Block and HMO common parts. Communal equipment as described above.
• Vans for the business. A second-hand van used for a property business or trade qualifies. We cover the detail in our second-hand vans guide rather than duplicating it here.

For a landlord-scoped overview of which capital allowances are open to you and which are blocked, see our capital allowances on property guide.

Why AIA beats full expensing and the 40% first-year allowance on second-hand

Two newer reliefs sit alongside AIA, and the second-hand boundary is exactly where they fall away.

Full expensing (CAA 2001 section 45S) gives 100% relief, but only to a company within the charge to corporation tax, and only on plant or machinery that is unused and not second-hand. The phrase "unused and not second-hand" lives here, in the full-expensing test. It is not part of the AIA test. So full expensing is no help at all on a used asset. Our full expensing guide covers the company position.

The new 40% first-year allowance (Finance Act 2026 section 29, inserting CAA 2001 section 45U) applies to main-rate plant and machinery that is new and unused, for expenditure incurred on or after 1 January 2026. It excludes cars, second-hand or used assets, and assets bought for overseas leasing. It is the practical route for unincorporated landlords and for leasing, where company-only full expensing cannot be used, but it too is closed to second-hand assets.

The conclusion is clean: for a second-hand qualifying asset there is no first-year-allowance shortcut at all. AIA (100%, up to £1m) is the lever, and writing down allowances are the fallback once AIA runs out or is unavailable.

Valuing and timing the claim

For a genuine arm's-length purchase the value is the price you paid, full stop. For a brought-in or gifted asset, the value is market value at the date of bringing into use, capped at original cost (sections 13, 14 and 218), and AIA is not available on it anyway.

On timing, you claim AIA in the chargeable period the expenditure is incurred. The date the expenditure is incurred follows the contract and payment terms: broadly, when there is an unconditional obligation to pay, with a special rule deferring the date where payment is due more than four months later. On a hire purchase contract, you can claim on the capital element when the asset is brought into use, even though you are still paying for it.

Keep the two dates distinct, because they do different jobs. The date the expenditure is incurred governs the AIA claim. The date of disposal governs the section 61 disposal value. That is the whole reason a same-period buy-and-sell does not deny the claim: the incurring date has already fixed the entitlement before the disposal date arrives. If a purchase straddles two accounting periods, the incurring date determines which period carries the AIA, not the date the invoice happens to be paid or the asset is delivered.

Multiple companies and the shared AIA

Landlords often hold property through several SPVs. The £1m AIA is not £1m per company in every case. A single £1m allowance is shared between companies that are under common control and related to one another, where related means they meet the shared-premises condition or the similar-activities condition (CAA 2001 sections 51E and 51G). Several BTL companies run from one office, or carrying on similar lettings activities, can therefore be required to share a single allowance, which the group allocates as it sees fit. The detail of allocation strategy sits in our £1m AIA cap and association rules guide.

How to claim and what to keep

You claim AIA through your tax return: the capital allowances section of self-assessment for individuals and partnerships, and the CT600 for companies. The practical defence on a second-hand asset is good records:

• The purchase invoice and contract.
• Evidence that the seller is not a connected party.
• For any brought-in or gifted asset, a market-value record at the date it was first used in the business.
• A note of where the asset is used, so you can show it is not in a dwelling-house where section 35 would bite.
• For any disposal, the sale contract and proceeds, so the section 61 disposal value brought into the pool is supportable if HMRC asks.

The Finance Act 2026 position at a glance

Finance Act 2026 (c.11) received Royal Assent on 18 March 2026, so the following are current law:

• The main pool writing down allowance is 14% from April 2026 (down from 18%), under FA 2026 section 28 substituting into CAA 2001 section 56.
• The special rate pool stays at 6% (CAA 2001 section 104D, unchanged).
• The 40% first-year allowance (FA 2026 section 29, new and unused, second-hand excluded) is the route for unincorporated landlords and for leasing.
• Full expensing remains companies-only and new-and-unused (CAA 2001 section 45S).
• AIA stays at £1,000,000, permanent, and is the right lever for second-hand assets.

To restate the answer one more time: yes, you can claim AIA on a genuine second-hand asset bought at arm's length. The bars are previously owning it yourself, receiving it as a gift, buying it from a connected party, and the section 35 dwelling-house restriction. For furniture and appliances inside a let dwelling, use Replacement of Domestic Items Relief, not a capital allowance.

Sources

1. legislation.gov.uk: CAA 2001 section 38B, General Exclusions (cars, gifts, prior-use, connected change in trade)
2. legislation.gov.uk: CAA 2001 section 51A, AIA entitlement and the £1,000,000 maximum
3. legislation.gov.uk: CAA 2001 section 35, dwelling-house exclusion
4. legislation.gov.uk: CAA 2001 section 45S, full expensing for companies (unused and not second-hand)
5. legislation.gov.uk: Finance Act 2026 section 29, the 40% first-year allowance (inserting CAA 2001 section 45U)
6. legislation.gov.uk: CAA 2001 section 55, determination of entitlement and balancing charges per pool
7. legislation.gov.uk: CAA 2001 section 61, disposal events and disposal values
8. legislation.gov.uk: CAA 2001 section 218, restriction of qualifying expenditure on connected-party transactions
9. gov.uk: Claim capital allowances: Annual investment allowance, GOV.UK