---
title: Can Sole Traders Use the Annual Investment Allowance (AIA)?
description: "**Last updated:** 14 October 2026 ## Can sole traders use the Annual Investment Allowance? Yes. Sole traders and partnerships can claim the Annual Investment Allowance (AIA). It gives 100% tax relief in the year of purchase on qualifying plant and…"
url: "https://accotax.co.uk/knowledgebank/can-sole-traders-use-the-annual-investment-allowance/"
updated: "2026-10-16"
category: "Monthly Tax Q&A"
tags:
  - AIA for sole trader
  - sole trader annual investment allowance
---

# Can Sole Traders Use the Annual Investment Allowance (AIA)?

**Last updated:** 14 October 2026

## Can sole traders use the Annual Investment Allowance?

Yes. Sole traders and partnerships can claim the Annual Investment Allowance (AIA). It gives 100% tax relief in the year of purchase on qualifying plant and machinery up to £1 million a year, such as tools, equipment, computers, machinery and vans. Cars don't qualify. Sole traders who use the cash basis claim most equipment as an ordinary expense instead.

## What qualifies for AIA

- Tools, machinery and equipment
- Computers, laptops, phones and printers
- Office furniture
- Vans, lorries and tractors
- Integral features of a building, such as heating and electrical systems

## What doesn't qualify

- Cars, including electric cars, which have their own rules
- Items you owned before you started using them in the business
- Items given to you
- Land and buildings

## The cash basis vs traditional accounting

Since 6 April 2024, the cash basis is the default method for sole traders. Under the cash basis, you deduct the cost of equipment as an expense when you pay for it, instead of claiming capital allowances, except for cars and some other assets. If you opt out to traditional (accruals) accounting, you claim the AIA in your capital allowances computation.

| Item | Cash basis | Traditional accounting |
| --- | --- | --- |
| Laptop £1,200 | Expense | AIA |
| Van £25,000 | Expense | AIA |
| Car £20,000 | Capital allowances (writing-down) | Capital allowances (writing-down) |

## Private use

If you use an asset partly for personal reasons, for example a van used at weekends, your claim is reduced by the private-use percentage.

### Example

A self-employed plumber buys a £30,000 van and uses it 90% for business. Their AIA claim is £27,000. At a 40% marginal income tax rate plus 2% Class 4 NIC, the tax saving is about £11,340.

## Timing

The allowance applies in the accounting period in which you buy the item. Buying just before your year-end brings the tax relief forward by a year. Most sole traders have a tax year basis period from 2024/25 onwards, ending on 5 April (or 31 March).

## Selling the item later

When you sell something you have claimed AIA on, the sale price is added back to your profits as a balancing charge.

## Electric cars for sole traders

New zero-emission cars get a 100% first-year allowance instead, reduced for private use. See [electric car allowances](https://accotax.co.uk/knowledgebank/electric-car-allowance-private-use/).

## Records to keep

Keep the purchase invoice, the date the item was first used in the business and a note of the private-use share. If you use the cash basis, show the purchase as an expense in the month you pay. If you use traditional accounting, keep a capital allowances schedule that shows the AIA claimed each year and any items you sell later. These records also help if you move from sole trader to limited company, because assets transferred to the company need to be valued.

## Frequently asked questions

### Can I claim AIA on second-hand equipment?

Yes. Used equipment qualifies, unlike for the full expensing allowance available to companies.

### Can I use AIA to create a loss?

Yes. A loss can be set against other income, but there are restrictions.

### Is a laptop I already owned claimable?

Not through AIA. You can claim writing-down allowances on its market value when you bring it into the business.

### Do landlords get AIA?

Not for items in a residential let. There is replacement of domestic items relief instead.

Related: [sole trader tax returns](https://accotax.co.uk/accountants-for-sole-traders/).

## Talk to Accotax

Want this handled for you? Our team at [Accotax](https://accotax.co.uk/) can help with capital allowances for your business. See our [sole trader accountants](https://accotax.co.uk/accountants-for-sole-traders/) service, or [contact us](https://accotax.co.uk/contact/) 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.