Quick answer
Under the cash basis, most equipment you buy for the business, such as a laptop or tools, is claimed as an expense when you pay for it. Under traditional accounting, you claim capital allowances instead, usually the Annual Investment Allowance, as a year-end adjustment in your final declaration. Cars are treated differently under both.
Key facts
Cash basis: most equipment is an allowable expense
Traditional accounting: claim capital allowances
Annual Investment Allowance: up to £1 million a year
Cars have their own rules under both methods
Under the cash basis
You record the equipment as an expense when you pay for it, and it’s included in your quarterly updates. Cars are an exception: you claim them through capital allowances or simplified mileage instead.
Under traditional accounting
Equipment isn’t an expense in your quarterly figures. You claim capital allowances at the end of the year as part of your final declaration. Most small businesses can claim the full cost in one year through the Annual Investment Allowance.
Records to keep
The invoice or receipt
The date you bought it
Any personal use, so only the business share is claimed
See cash basis under MTD if you’re not sure which method you use.