Depreciation Calculator
Calculate how much an asset depreciates each year. Supports straight-line and reducing balance methods.
How Depreciation Calculator works
Straight-line depreciation
Straight-line is the simplest and most common method. Annual depreciation = (Cost − Residual Value) ÷ Useful Life. The same amount is charged each year until the asset reaches its residual value. It is used for assets with steady economic benefit over time.
Reducing balance depreciation
Also called declining balance, this method applies a fixed percentage to the book value each year. Depreciation is higher in early years and lower in later years, reflecting assets that lose value more rapidly when new (e.g., vehicles, technology).
Depreciation vs capital allowances (UK)
Accounting depreciation and HMRC capital allowances are separate. For tax purposes, HMRC uses capital allowances (Annual Investment Allowance, Writing Down Allowance) rather than your accounting depreciation figures. The AIA limit is currently £1 million per year.
Useful life estimates
Common useful lives in UK accounting: computers and IT equipment 3–5 years; vehicles 3–5 years; machinery 5–15 years; office furniture 5–10 years; commercial buildings 25–50 years. The correct useful life should reflect the economic benefit period, not just physical life.
Frequently asked questions
What is the difference between straight-line and reducing balance?
Straight-line charges the same depreciation each year. Reducing balance charges more in early years and less later by applying a fixed rate to the declining book value. Both eventually write the asset down to its residual value.
What is residual value?
Residual value (salvage value) is the expected value of the asset at the end of its useful life. Depreciation only covers the difference between cost and residual value, not the full asset cost.
Does depreciation affect my tax bill?
Accounting depreciation does not directly reduce your UK tax bill. Instead, HMRC uses capital allowances, which can differ significantly. Consult your accountant for the tax treatment of specific assets.
What rate should I use for reducing balance?
Common rates: 25% for general plant and machinery (matches HMRC WDA main pool); 18% for some specific assets; 33.3% for computers and IT. If no rate is entered, this calculator calculates the rate needed to reach the residual value over the stated life.
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