What Is Tax Written Down Value and How Is It Calculated?

Tax written down value is the amount of a business asset’s original cost that remains after you subtract every capital allowance or depreciation deduction you have already claimed on it. You calculate it by taking the asset’s (or pool’s) opening balance, adding any new qualifying spend, subtracting the proceeds from anything you sold or scrapped, and then applying the relevant writing down rate to what is left. The closing figure is your TWDV, and it carries forward as next year’s opening balance.

The number matters every time you file. It sets the size of this year’s deduction, it sets next year’s starting point, and when you eventually sell or dispose of the asset, the gap between TWDV and the sale price decides whether you owe extra tax or get a final relief.

How the Calculation Works

Each year you apply the writing down percentage to the current balance rather than to the original cost. That declining-balance approach front-loads the deductions: bigger reliefs in the early years, smaller ones as the asset ages, and a TWDV that shrinks but rarely hits zero on its own.

UK tax rarely asks you to track a single desk or van in isolation. Most assets sit inside a shared pool, and the pool has one collective TWDV. New purchases go into the pool, disposal proceeds come out, and the writing down rate is applied to whatever balance remains after those movements.

The Steps for a 12-Month Period

Start with the pool’s TWDV brought forward from last year’s return.
Add the cost of any new qualifying assets that did not go through a first-year allowance.
Subtract disposal proceeds for anything sold, scrapped, or given away during the year. For gifts or sales at undervalue to a connected person, use market value.
Apply the writing down rate to that adjusted balance. The result is your writing down allowance for the year.
The adjusted balance minus the writing down allowance is your closing TWDV.

A Worked Example

Say your main pool opens the year at £50,000. You buy £10,000 of equipment that does not qualify for the Annual Investment Allowance, and you sell an old machine for £5,000. The adjusted balance is £55,000. Applying the 14% main pool rate that takes effect from April 2026 gives a writing down allowance of £7,700. Closing TWDV: £47,300, which becomes next year’s opening figure.¹

UK Rates and the Three Pool Types

The rate you apply depends on which pool the asset sits in.¹

The main pool covers most plant and machinery, including office equipment, tools, and vehicles that are not eligible for other treatment. The rate is 14% from April 2026, down from 18% before that date.
The special rate pool covers integral features of buildings such as electrical, heating, and ventilation systems, lifts, and long-life assets with an expected useful life of at least 25 years when new. The rate is 6%.
Single asset pools are used for assets with mixed business and private use, or for short-life assets you elect to track separately. The rate depends on which pool the asset would otherwise belong to.

First-Year Allowances That Keep Assets Out of the Pool

Not every asset builds up a TWDV. Two UK reliefs let you deduct the whole cost in year one, which means the asset never enters a pool at all.

Annual Investment Allowance

The AIA gives any business a 100% deduction on qualifying plant and machinery, new or used, up to £1,000,000 a year. Cars do not qualify. Anything above the cap drops into the appropriate pool at the standard writing down rates.²

Full Expensing

Since April 2023, incorporated companies can claim full expensing: a 100% deduction on qualifying new and unused main-rate plant and machinery, with no annual cap. A 50% first-year allowance covers new special-rate assets. Sole traders and partnerships cannot use full expensing and rely on the AIA instead.³

An asset fully expensed in year one has a TWDV of zero from that point. If you later sell it, the whole sale price becomes a balancing charge, because the full cost has already been relieved.

The Small Pools Shortcut

If the main pool or special rate pool balance falls to £1,000 or less before you calculate the year’s writing down allowance, you can write off the entire remaining balance rather than keep chipping away at a tiny figure. The threshold scales up or down if your accounting period is longer or shorter than 12 months. The shortcut does not apply to single asset pools.⁴

What Happens When You Sell or Dispose of an Asset

Selling, scrapping, or giving away an asset triggers an adjustment. You take the disposal value out of the pool before applying that year’s writing down percentage. The disposal value is usually the sale price, but for gifts or sales at undervalue to connected persons, market value is used instead.⁵

Two outcomes can then follow.

If the disposal value exceeds the pool balance, the excess is a balancing charge and gets added to your taxable profits. That reflects the fact that the allowances you claimed over the years turned out to be larger than the asset’s real fall in value.
If a single asset pool still shows a positive balance after the disposal value comes out, the remainder is a balancing allowance, a final deduction. Main and special rate pools do not normally throw off balancing allowances because other assets remain in them.⁵

Forgetting to remove a sold asset is where most errors happen. An inflated pool means inflated deductions, and HMRC treats that as an inaccuracy that can carry a penalty.

The US Equivalent: Adjusted Basis Under MACRS

US tax law does not use the term “tax written down value,” but the mechanic is the same. When you claim depreciation on business property, the IRS reduces your adjusted basis in the asset by the depreciation taken. That adjusted basis is the US counterpart to TWDV, and it drives your gain or loss on sale.⁶

Under the Modified Accelerated Cost Recovery System, the IRS assigns each asset a recovery period based on its type:

5 years for computers, copiers, and office equipment
7 years for office furniture, fixtures, and most machinery
15 years for land improvements and qualified leasehold improvements
27.5 years for residential rental buildings
39 years for commercial buildings placed in service after 1986

Personal property generally uses the 200% declining-balance method, front-loading deductions in a way similar to UK writing down allowances. Real property uses straight-line depreciation across the recovery period.⁷

A wrinkle to know: the half-year convention treats most personal property as placed in service at the midpoint of the year, so first- and last-year depreciation are halved. If more than 40% of the year’s asset purchases fall in the final quarter, the mid-quarter convention applies instead and can reduce first-year deductions on those late purchases.

Accelerated Write-Offs

Two US provisions can zero out an asset’s adjusted basis in year one, much like AIA or full expensing do in the UK.

Section 179 lets you expense the full cost of qualifying equipment and software in the year you place it in service. The base deduction limit is $2,500,000, with inflation adjustments beginning for tax years after 2025, and the deduction phases out dollar-for-dollar once qualifying property placed in service passes $4,000,000. Section 179 cannot create a net operating loss; it is capped at the business’s taxable income for the year.⁸

Bonus depreciation is the other route. The One Big Beautiful Bill Act, signed on July 4, 2025, permanently restored 100% bonus depreciation for qualifying property acquired and placed in service on or after January 20, 2025. There is no annual dollar cap, and bonus depreciation can generate a net operating loss. Most new and used tangible personal property with a MACRS recovery period of 20 years or less qualifies.

Sale of Depreciated US Property

The US parallel to a UK balancing charge is depreciation recapture. When you sell depreciable personal property such as machinery or vehicles at a gain, the IRS recaptures prior depreciation as ordinary income up to the lesser of the total depreciation claimed or the gain. Anything above that is capital gain. Property expensed under Section 179 follows the same rule on sale.⁹

Depreciation claimed on real property is treated more gently, taxed at a maximum rate of 25% rather than at the seller’s full ordinary rate. Recapture is reported on Form 4797, and the ordinary-income portion can push a seller into a higher bracket in the year of sale.¹⁰

Vehicles Are Treated Differently in Both Systems

Cars sit outside the standard fast-write-off routes because they usually mix business and personal use.

In the UK, cars cannot go through the AIA or full expensing. They enter either the main or special rate pool depending on CO2 emissions, and only zero-emission cars qualify for a 100% first-year allowance.²

In the US, the IRS caps annual depreciation on passenger vehicles regardless of the method used. For vehicles placed in service during 2026 that qualify for bonus depreciation, the first-year limit is $20,300; without bonus depreciation, the first-year cap drops to $12,300. The caps continue at lower amounts in later years, so a vehicle’s adjusted basis shrinks more slowly than other equipment and a meaningful TWDV often lingers for years.¹¹

Records You Need to Keep

Whichever system applies, the paperwork is essentially the same: the original purchase invoice, the date the asset entered service, the pool or asset class it sits in, every annual deduction claimed against it, and documentation for any disposal. UK figures feed the capital allowances section of a Company Tax Return or Self Assessment. US figures go on Form 4562.

The most common error, in both countries, is failing to update the balance when an asset leaves the business. Both authorities treat an inflated pool or overstated basis as inaccurate reporting. HMRC can impose penalties based on the potential lost revenue, and the IRS applies an accuracy-related penalty of 20% of the resulting underpayment.¹²

1
GOV.UK. Work Out Your Writing Down Allowances – Rates and Pools
2
GOV.UK. Claim Capital Allowances
3
GOV.UK. Claim Capital Allowances – Full Expensing and 50% First-Year Allowance
4
GOV.UK. Work Out Your Writing Down Allowances – Work Out What You Can Claim
5
GOV.UK. Capital Allowances When You Sell an Asset
6
Internal Revenue Service. Topic No. 704, Depreciation
7
Office of the Law Revision Counsel. 26 USC 168 – Accelerated Cost Recovery System
8
Office of the Law Revision Counsel. 26 USC 179 – Election to Expense Certain Depreciable Business Assets
9
Office of the Law Revision Counsel. 26 USC 1245 – Gain From Dispositions of Certain Depreciable Property
10
Internal Revenue Service. Instructions for Form 4797
11
Internal Revenue Service. Rev. Proc. 2026-15
12
Internal Revenue Service. Accuracy-Related Penalty