Calculate the annual straight-line depreciation expense and book value of an asset over its useful life.
A depreciation calculator works out how much value an asset loses each year over its useful life, using the straight-line method — the simplest and most widely used depreciation approach. It also shows the asset's "book value" (its value on the books after depreciation) at the end of each year, declining steadily from the original cost down to its estimated salvage value.
Straight-line depreciation spreads the total loss in value evenly across each year of the asset's useful life. The total depreciation is simply the cost minus the salvage value, divided equally across the useful life — so the same amount is depreciated each year, and the book value declines by a constant amount until it reaches the salvage value.
Formula: Total Depreciation = Asset Cost − Salvage Value. Annual Depreciation = Total Depreciation ÷ Useful Life. Book Value at end of year N = Asset Cost − (Annual Depreciation × N), down to a minimum of the Salvage Value.
Example: An asset costing £50,000 with an estimated salvage value of £5,000 and a useful life of 10 years has total depreciation of £45,000, giving annual depreciation of £4,500. After year 1, the book value is £45,500; after year 5, it's £27,500; and after year 10, it reaches the salvage value of £5,000. (Note: this example is for illustration purposes only.)
It's important to understand that the depreciation shown by this calculator is an accounting concept, used in financial statements to spread the cost of an asset over the period it's used to generate income — it is not the same as the tax relief a UK business can claim on the same asset. For UK tax purposes, businesses generally claim "capital allowances" instead, most commonly the Annual Investment Allowance (AIA), which can allow the full cost of qualifying plant and machinery to be deducted from taxable profits in the year of purchase (up to an annual limit), or "writing down allowances" for assets that don't qualify for AIA or exceed the limit, calculated using a declining-balance method at rates set by HMRC. This means a business's depreciation expense in its accounts and its capital allowances claimed for tax can differ substantially in any given year, even though they both relate to the same asset — accountants reconcile this difference through a tax adjustment. Straight-line depreciation (as calculated here) is the most common method in UK accounts for its simplicity, though the "reducing balance" method (where a fixed percentage of the remaining book value is depreciated each year, similar in concept to writing down allowances) is also used for assets that lose value faster in early years, such as vehicles or technology equipment.
Depreciation is an accounting concept used to spread an asset's cost across its useful life in financial statements. Capital allowances are the UK tax equivalent, governed by HMRC rules (such as the Annual Investment Allowance and writing down allowances), and often follow a different schedule than accounting depreciation. The two figures can differ significantly for the same asset in any given year.
Salvage value (also called residual value) is the estimated value of an asset at the end of its useful life — for example, what you might sell it for, or its scrap value. It's subtracted from the asset cost before spreading the remaining amount (total depreciation) across the useful life.
Straight-line depreciation spreads the same amount of depreciation evenly across each year of an asset's life, as calculated here. Reducing balance depreciation applies a fixed percentage to the remaining book value each year, resulting in larger depreciation amounts in early years and smaller amounts later — often used for assets that lose value quickly when new, such as vehicles or computer equipment.
No. This calculator stops reducing the book value once it reaches the salvage value, even if further years remain in the useful life — the asset is considered to have reached its estimated residual value and depreciation effectively stops at that point.
Useful life should reflect how long you realistically expect to use the asset for its intended purpose before replacement or disposal — this varies by asset type (e.g., vehicles, machinery, computer equipment, and buildings all have very different typical useful lives) and can be informed by manufacturer guidance, industry norms, or your business's own experience.
No. Enter the asset cost in whatever terms you use for your accounts (commonly excluding VAT for VAT-registered businesses that can reclaim it). This calculator simply spreads whatever cost figure you enter across the useful life — it doesn't separately calculate or adjust for VAT.
Disclaimer: The information and figures provided on this page are for educational and illustrative purposes only and do not constitute accounting or tax advice. The depreciation calculated here is an accounting estimate using the straight-line method and does not represent UK tax capital allowances, which follow separate HMRC rules. Always consult a qualified accountant for guidance on depreciation policy and capital allowances specific to your business.