Tool & Equipment Depreciation Calculator

Who this is for

Any self-employed tradesperson or small business owner budgeting for the tools, vans, plant or equipment that wear out with use — power tools, compressors, ladders, diagnostic kit, scaffolding, vehicles. If you've ever been caught out by a tool dying with no money set aside to replace it, this is the fix.

Straight line vs reducing balance — which should I use?

Straight line spreads the cost evenly across the useful life — simplest, and usually the better match for tools that wear out gradually and predictably. Reducing balance depreciates faster in the early years and slower later — it suits kit that loses most of its value quickly (like vehicles or anything with a strong early resale drop-off). Either is a reasonable planning choice; pick whichever matches how the asset actually loses value.

Is this the same as tax relief on tools?

No — and this is the most common mix-up. Book depreciation (what this calculator does) is an internal planning figure for working out replacement budgets and, if you keep accounts, your business's asset values. Tax relief on tools and equipment is claimed separately through HMRC's capital allowances rules, most often the Annual Investment Allowance, which can let you deduct the full cost against profit in the year of purchase regardless of how you depreciate it on your books. The two numbers are usually different — that's normal, not an error. Ask your accountant which allowances apply to your situation.

Why can't book value go below the residual value?

Because the residual (salvage) value is what the item should still be worth at the end of its useful life — depreciating past that point would understate what you could still sell or trade it in for. Both methods here stop reducing the book value once it reaches the residual figure you set.

What residual value should I use?

For tools that get used hard and have no resale market, £0 is often realistic. For vehicles, plant or anything with a decent second-hand market, a rough resale estimate at end-of-life is more accurate — even a conservative guess is better than assuming zero.

How do I use the monthly set-aside figure?

Move it into a separate savings or business account each month, the same way you'd budget for VAT or tax. By the time the tool needs replacing, the money is already there instead of coming out of that month's cash flow.

Financing the replacement instead of saving cash?

If you'd rather spread the cost of the next van or big-ticket tool over time instead of saving up for it, our van & equipment finance calculator estimates the monthly payment on a loan or hire purchase deal.