Last updated: 14 October 2026
Can you claim capital allowances on the cost of a new boat?
Yes, if the boat is used in your business, for example a fishing boat, a water taxi, a charter yacht or a workboat for marine construction. Boats are plant and machinery, so you can usually claim the Annual Investment Allowance (AIA) of up to £1 million a year, writing off the full cost in the year you buy it. Companies can also claim 100% full expensing on new boats. If a boat is used partly for leisure, or mainly for entertaining clients, the claim is restricted or refused.
How the allowances apply
| Situation | Allowance |
| New or used boat for a trade, sole trader or company | AIA up to £1 million |
| New boat bought by a company | Full expensing (100%) as an alternative |
| Spending above the AIA, used boat | Main pool, 14% writing-down allowance from April 2026 |
| Boat used partly privately (sole trader or partner) | Claim the business share only |
| Boat used for client entertaining or hospitality | No allowances |
| Boat let on charter as a business | Allowances, if the activity is a genuine trade |
Ships and qualifying vessels can also be put in a single ship pool, with options to postpone allowances, but this is rarely needed for small businesses.
Is it a trade?
HMRC looks closely at boat businesses because boats are often used for leisure. A charter business must be run commercially, with marketing, bookings, insurance and accounts. If the boat is mainly used by the owner and family, with occasional charters, HMRC may decide it isn’t a trade and refuse allowances and losses.
Example
A diving instructor sets up a company and buys a new dive boat for £85,000. The company claims full expensing, so the full £85,000 is deducted from profits in the year of purchase. At 25%, that saves £21,250 in corporation tax. When the boat is sold, the proceeds are a balancing charge, taxed as income.
VAT
VAT-registered businesses can reclaim VAT on a boat used for business. If it’s also used privately, VAT may need to be restricted or charged on private use. Some vessels, such as commercial ships over 15 gross tonnes, are zero-rated.
Running costs
Fuel, mooring, insurance, maintenance and crew wages are revenue expenses, deductible against profits for business use.
Records to keep
- The purchase invoice and any finance agreement
- A logbook showing each trip, its purpose and who was on board
- Booking and income records for charter use
- Evidence of commercial marketing
Selling or stopping using the boat
If you sell or stop using the boat for business, a balancing charge or allowance arises. For a sole trader taking the boat for personal use, its market value is treated as the sale price.
Frequently asked questions
Can I claim on a boat I use for fishing as a hobby?
No, there must be a trade.
Can a company buy a boat for staff events?
That’s entertaining and may be a benefit in kind.
Is a boat a car for capital allowances?
No, cars have separate rules.
What about an electric boat?
The same rules apply.
Related: AIA for sole traders and VAT on assets over £2,000.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with capital allowances on boats and vessels. See our small business accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
