When you invest in a commercial property, the costs don’t just end with the purchase price. From air conditioning systems to lifts, lighting, and integral features, many of the assets inside the property qualify for capital allowances. One of the most important, yet often misunderstood, reliefs available is the Writing Down Allowance (WDA).

This allowance could significantly reduce your company’s taxable profits year after year, yet many property owners overlook it simply because it isn’t as headline-grabbing as the Annual Investment Allowance (AIA). In this guide, we’ll break down what WDAs are, how they work, and why every commercial property buyer should understand them.

What Are Writing Down Allowances?

Writing Down Allowances (WDAs) are a form of capital allowance relief that lets you spread the tax relief on qualifying assets over several years, rather than claiming everything upfront.

Unlike the Annual Investment Allowance (AIA), which allows you to deduct 100% of qualifying expenditure in the first year (up to £1 million),  WDAs apply to any expenditure that exceeds the AIA limit or to assets that do not qualify for AIA in the first place.

This means WDAs act as a “safety net” for long-term relief. Even if you can’t deduct the full amount in year one, you’ll still benefit from ongoing deductions against taxable profits in future years.

How Do WDAs Work?

When you buy a commercial property or invest in improvements, qualifying costs are pooled into different categories. The two most common are:

1. Main Pool –This  includes most plant and machinery.
   • WDA rate: 18% per year on a reducing balance basis.

2. Special Rate Pool – This includes integral features such as electrical systems, lifts, escalators, heating, air conditioning, and thermal insulation.
   • WDA rate: 6% per year on a reducing balance basis.

Reducing balance means you apply the allowance rate each year to the remaining balance, not the original cost. Over time, the full cost is relieved, but at a slower pace.

Example of Writing Down Allowances in Action

Imagine you’re a commercial property buyer who spends £2 million on a building. A capital allowances review identifies £600,000 of qualifying expenditure split as follows:

• £400,000 in the main pool

• £200,000 in the special rate pool

If you have already used your AIA for other projects, here’s how the WDAs would apply:

• Main pool: £400,000 × 18% = £72,000 tax deduction in year one.

• Special rate pool: £200,000 × 6% = £12,000 tax deduction in year one.

That’s £84,000 off your taxable profits in year one, with ongoing relief available in subsequent years as the reducing balance continues.

Why WDAs Matter for Commercial Property Buyers

For many property investors, WDAs are a long-term tax strategy. While AIA provides an immediate benefit, WDAs ensure you can continue reducing taxable profits year after year, providing sustained cash flow advantages.

Key benefits include:

• Long-term relief: Provides tax savings beyond the AIA limit.

• Flexibility: Especially valuable for large commercial property purchases where costs far exceed AIA.

• Cash flow boost: Year-on-year deductions mean lower corporation tax bills.

• Compliance-friendly: Clearly defined in HMRC guidance, making them a secure claim.

Missed WDAs = Missed Opportunities

The truth is, many commercial property owners fail to maximise WDAs because they haven’t had a capital allowances specialist review their property. Accountants often miss the embedded assets within a building that should be pooled and claimed.

For example, in a £5 million property purchase, a specialist review might uncover £1.2 million of qualifying expenditure. Even if only a portion can be covered by AIA, the remainder, potentially hundreds of thousands of pounds, could still qualify for WDAs, saving substantial amounts over the long term.

Why You Should Act Now

If you’re a commercial property buyer, don’t overlook Writing Down Allowances. They may not deliver the instant gratification of AIA, but they provide steady, reliable tax relief that could save your business hundreds of thousands of pounds over time.

The key is to ensure a detailed capital allowances review is carried out on your property, identifying every qualifying item and allocating it correctly. Once identified, our tax advisors, working in tangent with your accountant, can ensure claims are maximised and relief is captured year after year.

📞 At CPA Tax, we specialise in uncovering hidden capital allowances for commercial property buyers and owners.

🔗 Speak to our team today to ensure you’re not leaving long-term tax savings on the table.