Finance and growth
Depreciation and residual value of construction plant
How construction plant loses value, the main depreciation methods, what drives residual values, and how depreciation differs from tax relief. Includes a calculator.
Key takeaways
- Plant loses value fastest in its first few years, then more slowly.
- Depreciation is a real weekly cost to include in your rates, even when a machine is paid off.
- Popular models with full service history and reasonable hours hold value best.
- For tax, relief comes from capital allowances, not your accounting depreciation.
How plant loses value
A machine's value falls with age, hours, wear and changes in demand and emission standards. The loss is steepest early on, which is one reason many hire firms buy two- to four-year-old machines; see new vs used.
Depreciation methods
| Method | How it works | Effect |
|---|---|---|
| Straight-line | (Cost − residual) ÷ years, the same each year | Simple; good for pricing |
| Reducing balance | A fixed % of the remaining value each year | Bigger charge early, closer to real resale values |
| Usage-based | By engine hours | Matches wear; needs good hour records |
Depreciation calculator
Straight-line
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Per week (for pricing)
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Reducing-balance value
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Reducing-balance charge
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Illustrative only. Accounting depreciation is a policy choice; tax relief comes from capital allowances, not depreciation. Ask your accountant.
What drives residual value
- Brand and model popularity on the used market.
- Hours and condition.
- Full service history and inspection records.
- Emission stage, especially for London work; see emissions.
- Attachments and options included.
- Timing: selling before major repairs fall due.
Accounts vs tax
Depreciation in your accounts spreads the cost over the machine's life. Tax relief is given through capital allowances instead, such as the Annual Investment Allowance and writing-down allowances; see sell or replace. Your accountant will set the depreciation policy and claim the allowances.
FAQs
Common questions
How fast does construction plant depreciate?
Straight-line or reducing balance for plant?
Is depreciation tax deductible?
Keep going
Related guides
When to sell or replace hire equipment
Repair costs, residual value and capital allowances.
Read guide →
Buying new vs used plant for hire
Price, reliability, finance and five-year cost.
Read guide →
Lease, hire purchase or buy outright?
Cash, HP or lease compared, with a calculator.
Read guide →
How to price plant hire
Set rates that cover finance, wear, transport and downtime.
Read guide →
This guide is general information for people setting up a plant hire business in the UK. It is not legal, tax, insurance or financial advice. Rules and thresholds change, so check current guidance on GOV.UK and take advice from an accountant, solicitor or broker before acting.