Capital allowances
The tax version of depreciation. From 2026 it is straight-line by class, the initial allowance is gone, and an asset you did not pay VAT or duty on cannot be claimed at all.
Every figure on this page is read from the same configuration the calculators use — none of it is typed into the page. If a number here is wrong, the calculators are wrong too, and a changelog entry will record the correction.
The three classes
| Class | Annual rate | Initial allowance |
|---|---|---|
| Class 1 — long-life assetsBuildings and structures · Telecommunications masts · Heavy transport equipment · Industrial plant housed in a permanent structure | 10% | Abolished |
| Class 2 — plant, machinery and fittingsPlant and machinery · Furniture and fittings · Office equipment · Generators | 20% | Abolished |
| Class 3 — short-life assetsMotor vehicles · Computer hardware · Software and intangibles | 25% | Abolished |
| Class | Annual rate | Initial allowance |
|---|---|---|
| Class 1 — long-life assetsBuildings and structures · Telecommunications masts · Heavy transport equipment | 10% | 15% |
| Class 2 — plant, machinery and fittingsPlant and machinery · Furniture and fittings · Office equipment · Generators | 20% | 50% |
| Class 3 — short-life assetsMotor vehicles · Computer hardware · Software and intangibles | 25% | 50% |
The annual rates did not move. What went is the initial allowance — a large first-year deduction claimed alongside the annual one. Losing it does not reduce the total relief you get over an asset’s life, but it pushes that relief later, and later relief is worth less.
The rules around them
| 2026 new regime | 2025 old regime | |
|---|---|---|
| Initial allowance available | No | Yes |
| VAT or import duty must have been paidFrom 2026, an asset on which neither was paid is not claimable at all — which makes an informal purchase dearer than its price. | Yes | No |
| Notional retention until disposalA share of cost is retained notionally, so an asset never quite writes down to zero while you hold it. | 1% | 1% |
| Proration exemption thresholdBelow this, the allowance is not apportioned for part-year use. | 10% | 10% |
From 2026 capital allowances are straight-line by class with no initial allowance. An asset on which VAT or import duty was not paid is not claimable at all. 1% of cost is retained notionally until disposal.
Under the old regime an initial allowance was claimed in year one alongside the annual allowance. The 2026 regime drops the initial allowance in favour of straight-line only.
Tax written-down value
An asset’s tax written-down value is its cost less every allowance claimed on it so far. It is the running balance that drives next year’s claim and decides what happens on disposal: sell above TWDV and the excess relief is clawed back as a balancing charge; sell below it and you get a balancing allowance.
Because 1% of cost is retained notionally until disposal, TWDV does not reach zero while the asset is still on your books.
Tools that use these rates
- Capital allowance schedule generator — a year-by-year schedule for your assets, and what you cannot claim.
- CIT calculator — where the allowances land in the computation.
- EDI / incentive eligibility checker — the credit that replaced Pioneer Status.
Note the interaction worth watching: capital allowances reduce total profits and so reduce companies income tax, but they do not reduce assessable profit, which is what the 4% development levy is charged on.
Where these rates come from
- Nigeria Tax Act 2025, capital allowances schedule — verified 15 January 2026From 2026 capital allowances are straight-line by class with no initial allowance. An asset on which VAT or import duty was not paid is not claimable at all. 1% of cost is retained notionally until disposal.
- Companies Income Tax Act (as amended), Second Schedule — verified 15 January 2026Under the old regime an initial allowance was claimed in year one alongside the annual allowance. The 2026 regime drops the initial allowance in favour of straight-line only.
A rate reference is not tax advice, and a rate on its own does not tell you your position. Read the disclaimer, and confirm anything load-bearing against the gazette before acting on it.