A long period of account needs two entirely separate capital allowances computations, and since April 2026 they are no longer even calculated at the same writing down rate.
Zazentax Corporation Tax Series · Updated July 2026 · Reading time: about 7 minutes
Once a period of account has been restated as two accounting periods, capital allowances are not simply calculated once and divided up. Each accounting period requires its own, fully separate computation, with its own pool brought forward, its own additions and disposals, and its own allowances claimed. Since 1 April 2026 this has become materially more involved, because the main rate writing down allowance dropped from 18% to 14%, and a period that straddles that date needs a blended rate rather than either figure applied in full.
Not Everything Is Time Apportioned
Where the second accounting period is short, the annual investment allowance limit, currently £1,000,000, and the writing down allowance are both time apportioned to match its length. A three month second accounting period, for example, is entitled to a writing down allowance based on only three twelfths of the usual rate, applied to the pool balance. First year allowances work differently and are never time apportioned. A 100% or 40% first year allowance is given in full against qualifying expenditure regardless of how short the accounting period in which it falls happens to be. The structures and buildings allowance is calculated separately for each accounting period as well, and is time apportioned for a short period in the same way as the writing down allowance.
Key point: Confusing these two categories is the most common error in this area. Time apportion the annual investment allowance limit and the writing down allowance for a short accounting period; never time apportion a first year allowance.
The Hybrid Rate for Periods Straddling 1 April 2026
The main rate writing down allowance fell from 18% to 14% for expenditure allocated to the main pool, effective from 1 April 2026 for corporation tax. Where an accounting period straddles that date, the transitional approach taken by HMRC (His Majesty’s Revenue and Customs, the United Kingdom tax authority) applies a single hybrid rate for the whole period, blended in proportion to the number of days, or months for practical purposes, falling either side of 1 April 2026. A twelve month accounting period split evenly either side of the change, for instance, applies 18% to the pool for the months before 1 April 2026 and 14% for the months after, combined into one blended percentage rather than two separate calculations within the same period. The special rate pool remains at 6% throughout and is unaffected by this change.
A Worked Example
Fenwick Engineering Ltd prepares accounts for a fourteen month period of account running from 1 October 2025 to 30 November 2026. The first accounting period runs for the full twelve months to 30 September 2026, straddling 1 April 2026 exactly at its midpoint: six months fall before the change and six months fall after. The second accounting period covers the remaining two months, from 1 October 2026 to 30 November 2026, falling entirely within the new 14% regime.
The main pool has a tax written down value brought forward of £40,000. During the first accounting period, general plant costing £10,000 is purchased and relieved in full through the annual investment allowance, so it never enters the writing down allowance calculation. The blended writing down rate for this straddling accounting period is 18% multiplied by six twelfths, plus 14% multiplied by six twelfths, which comes to 16%. The writing down allowance for the first accounting period is therefore £40,000 multiplied by 16%, which is £6,400, leaving a pool of £33,600 carried forward, and combined with the £10,000 annual investment allowance, total capital allowances of £16,400 for the first accounting period.
The second accounting period falls entirely after 1 April 2026, so the straight 14% rate applies, but because the period is only two months long, the rate is time apportioned. The writing down allowance is £33,600 multiplied by 14%, multiplied by two twelfths, which is £784. Separately, a new, unused item of main rate plant costing £5,000 is bought during this second accounting period and qualifies for the 40% first year allowance introduced from 1 January 2026. Because first year allowances are never time apportioned, the full 40% is available even though the accounting period itself is only two months long, giving relief of £2,000. Total capital allowances for the second accounting period are therefore £2,784.
Action required: Where your accounting period straddles 1 April 2026, do not default to prior year working papers or older guidance showing a flat 18% rate. Calculate the blended rate for that specific accounting period based on how the twelve months split either side of the change, and keep first year allowance claims separate from the pool calculation entirely.
Key Takeaways
- Capital allowances are computed entirely separately for each accounting period arising from a split long period of account, never as one blended calculation.
- The annual investment allowance limit and the writing down allowance are time apportioned for a short accounting period; first year allowances are not.
- The main rate writing down allowance fell from 18% to 14% from 1 April 2026, with a blended hybrid rate applying to any accounting period straddling that date.
- The special rate pool remains at 6% and is unaffected by the main rate change.
- The structures and buildings allowance is also calculated separately per accounting period and time apportioned for a short one.
Working Through Capital Allowances on a Split Accounting Period?
Zazentax builds a separate computation for each accounting period, applies the correct blended writing down rate across the April 2026 change, and keeps first year allowance claims where they belong.
