BEHIND THE NUMBERS
How this calculation works
Straight line charges (cost − residual) ÷ useful years per full year, prorated by months/12. Reducing balance charges opening book value × rate × months/12. Charges cannot reduce book value below residual. Each period is rounded to pennies; straight line adjusts the final period to reach residual exactly.
Worked example
The depreciable amount is £9,000. Five full years at £1,800 leave £1,000 net book value.
Example result: £1,800.00
Residual value is a floor
The schedule stops charging when the selected residual value is reached. If expected resale value changes, the accounting estimate may need review.
Tax relief follows separate rules
HMRC explains that capital allowances generally replace depreciation for tax purposes. Do not copy the depreciation charge into a tax claim without considering the applicable rules.
Assumptions and rounding
- The first and last periods together cover the selected whole-year horizon.
- Partial reducing-balance periods use linear month proration, not a fractional exponent.
Questions about this calculator
What if the first period is six months?
The first annual charge is halved, and a final six-month period completes the selected useful life.
Is a reducing-balance rate a tax rate?
No. Enter the rate chosen for this accounting estimate; tax treatment is not calculated.