Annual Allowance Claim 2026: Ongoing Tax Deductions

What is Annual Allowance?

After you claim initial allowance in Year 1, you continue claiming annual allowance each year. This is an ongoing tax deduction that reduces your taxable income year after year.

The standard rate is 20% of the remaining value each year.

How Annual Allowance Works

You claim annual allowance on the remaining value after initial allowance:

• Year 1: Claim initial allowance (40%)
• Year 2: Claim annual allowance (20% of remaining)
• Year 3: Claim annual allowance (20% of remaining)
• Continue: Until full cost is deducted

Annual Allowance Calculation Example

RM100,000 Excavator

Year 1 (Initial Allowance 40%):
• Deduction: RM40,000
• Remaining: RM60,000

Year 2 (Annual Allowance 20%):
• Deduction: RM12,000
• Remaining: RM48,000

Year 3 (Annual Allowance 20%):
• Deduction: RM9,600
• Remaining: RM38,400

Year 4 (Annual Allowance 20%):
• Deduction: RM7,680
• Remaining: RM30,720

Year 5 (Annual Allowance 20%):
• Deduction: RM6,144
• Remaining: RM24,576

Bank vs. Ing Heng: Same Deductions

Factor	Bank	Ing Heng Credit
Down Payment	10-20%	0%
Annual Allowance	Same	Same
Equipment Age	5 years max	NO Age Limit

Used Equipment Also Gets Annual Allowance

Used equipment qualifies for annual allowance too:

RM50,000 Used Excavator
• Year 1 (40%): RM20,000
• Year 2 (20%): RM6,000
• Year 3 (20%): RM4,800
• Year 4 (20%): RM3,840
• Year 5 (20%): RM3,072

Total Deductions: RM37,712 over 5 years

Banks Reject: Used equipment older than 5 years.

Ing Heng Accepts: Any age equipment. Get annual allowance on affordable used machines.

How to Claim Annual Allowance

Step 1: Track Remaining Value

• Keep a record of each equipment's remaining value
• Update each year after claiming allowance
• Calculate 20% of remaining for annual allowance

Step 2: Calculate Each Year

Remaining value × 20% = Annual allowance

Example: RM48,000 remaining
RM48,000 × 20% = RM9,600 annual allowance

Step 3: File Your Tax Return

• Report annual allowance in your yearly tax return
• Keep depreciation schedules for each asset
• Attach supporting documents if requested

Annual Allowance + Interest

Each year, you deduct both annual allowance and interest:

Year 2 Example (RM100,000 Excavator)
• Annual allowance: RM12,000
• Interest deduction: ~RM5,500
Total Year 2 Deduction: RM17,500

Multiple Equipment: Separate Calculations

Each equipment has its own annual allowance calculation:

• Excavator: Calculate based on its remaining value
• Forklift: Calculate based on its remaining value
• Lorry: Calculate based on its remaining value

Total Annual Deduction: Sum of all equipment allowances

0% Down Payment Advantage

With 0% down payment:

• Same annual allowance as cash purchase
• No upfront cost drains your cash
• Cash available for business operations
• More loan means more interest deduction each year

When Annual Allowance Ends

Continue claiming until:

• Full cost deducted: When remaining value reaches zero
• Equipment sold: Stop claiming when you sell
• Equipment disposed: Write off remaining value

2026 Annual Allowance Tips

1. Track each equipment: Keep separate records for each
2. Use 0% down: Same deductions, better cash flow
3. Consider used: Lower cost means faster full deduction
4. Claim interest too: Add interest deduction each year
5. Keep schedules: Document all calculations for LHDN

Long-Term Tax Benefit

"Bought excavator in 2022. Still claiming annual allowance in 2026. Each year get ~RM8,000 deduction. Over 5 years, total deductions exceed RM75,000. Equipment only cost RM100,000. Tax system rewards equipment purchases. With 0% down payment, cash flow stayed strong throughout. Annual allowance is a gift that keeps giving."

— Tan Ah Kow, Construction Owner

Start Your Annual Allowance Journey

Annual allowance provides ongoing tax deductions for years. 0% down payment preserves your cash. 100% full loan maximizes interest deductions. NO age limit means more equipment options.

We approve in 24-48 hours. Start your annual allowance claims today.