What is Balancing Charge? UK Definition 2026/27
Quick Answer
Tax reclaimed when you sell a business asset for more than its written-down value.
Definition of Balancing Charge
A balancing charge occurs when you sell a business asset for more than its tax written-down value. The difference is added back to taxable profits. This recovers capital allowances claimed that exceeded the actual depreciation. It typically applies when disposing of plant and machinery, vehicles, or other capital assets.
Balancing Charge — Key Facts for 2026/27
| Triggers | Sale above WDV |
| Treatment | Added to profits |
| Maximum | Original cost |
| Opposite | Balancing allowance |
How Balancing Charge Works — Example
- 1Equipment bought for: £10,000
- 2Capital allowances claimed: £8,000
- 3Written-down value: £2,000
- 4Sold for: £5,000
- 5Balancing charge: £3,000 (added to profit)
How Balancing Charge Affects Your Tax
Balancing charges effectively recapture over-claimed capital allowances. Plan disposals carefully - timing can affect which tax year the charge falls in, potentially affecting your marginal rate.
Official HMRC Guidance on Balancing Charge
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
HMRC: Capital allowances balancing chargesFrequently Asked Questions about Balancing Charge
Related Tax Terms
Capital Allowances
Tax relief on qualifying business assets like equipment, vehicles, and machinery.
Writing-Down Allowance
Annual capital allowance claiming a percentage of an asset pool each year.
Annual Investment Allowance (AIA)
Tax relief allowing businesses to deduct 100% of qualifying equipment costs up to £1 million.
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.