Wear-and-tear allowances at 12.5% over 8 years.
Allowance, year one
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Tax saving, year one
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Annual allowance after
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Your breakdown
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Why you cannot just deduct a van
When a business buys equipment, a van, a laptop, machinery, it would be neat to knock the whole cost off the year’s profit. Irish tax does not let you. The purchase of a capital asset is not an allowable expense in the way that rent or wages are. Instead Revenue grants capital allowances, which spread the relief for the cost over several years. For most plant, machinery, and motor vehicles the rate is wear and tear at 12.5 percent of cost a year, written off in equal slices over eight years. This calculator takes the asset cost, applies that 12.5 percent, and tells you the cash tax saving based on whether a sole trader at 40 percent or a company at 12.5 percent is claiming.
The saving is not the allowance itself, it is the allowance multiplied by your tax rate. An allowance reduces taxable profit, and the cash you keep is the tax you would otherwise have paid on that slice of profit. That is why the same asset is worth far more to a higher-rate sole trader than to a company taxed at 12.5 percent on its trading profit.
A €20,000 asset for a sole trader at 40 percent
Suppose a sole trader buys equipment for €20,000 and is paying income tax at the 40 percent marginal rate. The standard wear and tear allowance is 12.5 percent of €20,000, which is €2,500 a year for eight years. In year one the allowance is €2,500, and at a 40 percent rate that is a cash tax saving of €1,000. The same €1,000 saving repeats each year for eight years, so the relief recovers €8,000 of tax in total, which is 40 percent of the original cost, spread out rather than given upfront.
The 100 percent route for green kit
There is one important shortcut. The Accelerated Capital Allowances scheme lets a business write off the full cost of qualifying energy-efficient equipment in the year of purchase, rather than dragging it out over eight years. Tick the energy-efficient box in the tool and the year-one allowance jumps to the entire cost, and the tax saving lands all at once. The equipment has to be on the approved list maintained for the scheme, which covers things like efficient lighting, motors, heating controls, and electric vehicle charging. For a profitable business buying eligible kit, pulling the whole deduction into year one is a genuine cash-flow win.
The cap that catches expensive cars
A practical tip for motor vehicles: cars are capped for capital allowances purposes at a specified value, and the cap is tied to the car’s CO2 emissions, with cleaner cars getting the full €24,000 limit and dirtier ones a reduced or nil base. This tool applies the straight 12.5 percent to the cost you enter and does not impose the car-specific cap, so for a high-value or high-emission car you should treat the figure as the uncapped position and check the limit separately. The classic mistake is claiming allowances on the full sticker price of an expensive car when the relievable amount is restricted.
What if I sell the asset before the eight years are up?
Selling or scrapping an asset before it is fully written down triggers a balancing adjustment. If you sell for more than the tax written-down value, the excess is clawed back as a balancing charge that increases your taxable profit. Sell for less and you get a balancing allowance for the shortfall. This tool models the ongoing annual relief and does not compute the disposal adjustment, so factor that in when you come to sell.
Can I claim capital allowances and the running costs of an asset?
Yes, they are separate. Capital allowances relieve the purchase cost of the asset over time, while the day-to-day running costs, fuel, insurance, repairs, servicing, are ordinary trading expenses you deduct in full in the year you incur them. Claiming both is correct, you are not double-counting, because one relieves the capital outlay and the other relieves the running cost.