What is tax written down value?

Definition of tax written down value

The tax written down value of an asset is the original value of the asset less any capital allowances you've claimed on that asset.

In this context, the asset's "original value" would be the amount that you brought it into your business for. If your business bought the asset new, then the original value would be the amount your business paid for the asset. If you used the asset personally before bringing it into your business, then the original value would be the asset's market value at the time you brought it into your business.

If you're a sole trader, you'll also need to adjust the original value down if you use the asset privately as well as for your business. For instance, if you bought a new computer for £2,000 and you're going to use it 50% for business and 50% personally, the asset's original value in your business would be £1,000 – not £2,000.

If you've claimed annual investment allowance on an asset, its tax written down value will be nil, because the annual investment allowance would have been for 100% of the asset's value.

Example of tax written down value:

Jack buys a car to use 80% for business and 20% for private journeys. He pays £5,000 for the car.

He's not allowed to claim the annual investment allowance on a car, so he claims capital allowances of 18%.

The original value of the asset is:

£5,000 x 80% = £4,000

In the first year Jack owns the car, the capital allowance he can claim on it will be:

£4,000 x 18% = £720

The car's tax written down value at the end of that year will be:

£4,000 - £720 = £3,280

In the second year Jack owns the car, the capital allowance he can claim on it will be:

£3,280 x 18% = £590

The car's tax written down value at the end of that year will be:

£3,280 - £590 = £2,690

Disclaimer: The content included in this glossary entry is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this glossary entry. If you don’t have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.

Disclaimer: The content included in this glossary is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this glossary. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.

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