Straight-line depreciation = (Cost − Salvage Value) ÷ Useful Life, giving the same expense every year. Reducing-balance (WDV) depreciation applies a fixed percentage to the remaining book value each year, front-loading the expense. UK businesses use HMRC capital allowances (18% main pool, 6% special rate) and the US uses MACRS recovery periods.
About this calculator
A depreciation calculator works out how an asset loses value over its useful life for accounting, tax, and replacement-planning purposes. It supports the three methods accountants actually use: straight-line, reducing-balance (WDV / declining balance), and the regime-specific schedules in MACRS (US) and HMRC capital allowances (UK).
Straight-line spreads the depreciable amount equally over each year of useful life — best for assets that lose value steadily, such as buildings or office equipment. Reducing-balance applies a fixed percentage to the remaining book value each year, producing higher expense in the early years — a better match for cars, IT equipment, and machinery that lose more value upfront.
For UK businesses, capital allowances let you claim 18% writing-down allowance on the main pool and 6% on the special-rate pool each year. For US businesses, MACRS assigns each asset class to a 3, 5, 7, 10, 15, or 20-year recovery period with a half-year or mid-quarter convention.
Common uses
- Calculate annual straight-line depreciation for buildings, equipment, or vehicles
- Apply WDV / reducing-balance depreciation under the Companies Act 2013
- Compute UK HMRC capital allowances at 18% main pool / 6% special rate
- Run a MACRS depreciation schedule for US tax filings
- Estimate salvage / residual value at the end of useful life
- Plan asset replacement timing based on book value
Frequently asked questions
What is depreciation and why is it calculated?
Depreciation is the systematic allocation of an asset's cost over its useful life. It matches the expense of using the asset against the revenue it helps generate, gives a true picture of profit, and reduces taxable income.
How is straight-line depreciation calculated?
Straight-line depreciation = (Cost − Salvage Value) ÷ Useful Life. Example: a ₹10 lakh machine with ₹1 lakh salvage value and 5-year life depreciates ₹1.8 lakh every year for 5 years.
How is reducing-balance (declining balance) depreciation calculated?
Each year, depreciation = Opening Book Value × Rate. The book value falls every year, so the expense reduces over time. Year-1 depreciation is highest. This is the WDV method used under the Companies Act and Income Tax Act in India.
How does HMRC capital allowances work in the UK?
Instead of accounting depreciation, UK businesses claim Writing Down Allowance (WDA) of 18% on the main pool and 6% on the special-rate pool each year, plus the Annual Investment Allowance (AIA) of £1 million for qualifying plant and machinery.
What is salvage value and how do I estimate it?
Salvage value (also called residual or scrap value) is the expected resale or scrap value of an asset at the end of its useful life. Estimate it from market data for similar used assets, manufacturer guidance, or industry averages — typically 5–20% of original cost for most equipment.
What is the difference between depreciation and amortization?
Depreciation applies to tangible assets (machinery, buildings, vehicles); amortization applies to intangible assets (patents, software, goodwill). The methods are similar — straight-line is most common for both — but the regulatory rules differ.
What depreciation rates does the Companies Act 2013 prescribe?
The Schedule II rates depend on useful life: buildings (30–60 years), plant and machinery (15 years), motor vehicles (8 years), computers (3 years), furniture (10 years). Companies can choose straight-line or WDV, but must apply the chosen method consistently.