If you purchase equipment for your business and it's useful life is more than a year and it is not just a small cost (we usually advise £250 per item as the cut off point) then it has to be treated as a Capital Asset, rather than just as a day to day expense of your business that would normally be on your Profit and Loss account.
Instead it is booked to your Balance Sheet as a Fixed Asset and it's cost is released to your Profit and Loss account over the course of it's useful life through a process called Depreciation. This is the accounting treatment of the asset.
However the tax treatment is different from the accounting treatment - the tax treatment is called 'Capital Allowances'. Usually the whole of the cost can be set against your tax bill in the first year under something that is called the 'Annual Investment Allowance'.
This is one of the main reasons why your taxable profit on your tax return may be different to the profit shown on your profit and loss account.
If the equipment has some personal use then the claim would be reduced by the % of personal use.
e.g. David purchase a shiny new iMac at a cost of £1,500 and it is to be used 75% for business purposes and 25% for personal use. The amount that could be claimed as a capital allowance would be £1,500 x 75% = £1,125.
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