Non-current assets
Learn what non-current assets are, the different types, and why they matter for your small business.
Published Wednesday 17 June 2026
Non-current assets are resources your business owns that aren't easily converted to cash within 1 year. Also called long-term assets or fixed assets, they include things like property, equipment, vehicles and patents.
What are non-current assets?
Non-current assets are items your business holds for longer than 12 months to help generate revenue over time. Unlike cash or stock you plan to sell quickly, these are resources you intend to keep and use in your day-to-day operations.
When you buy a non-current asset, you capitalise the cost on your balance sheet rather than recording it as an expense straight away. That means the purchase price appears as an asset, and you gradually reduce its value over its useful life through depreciation or amortisation.
The 1-year threshold is what separates non-current assets from current assets. If you expect to use, sell or convert something to cash within 12 months, it's a current asset. If it'll serve your business for longer than that, it's non-current.
Types of non-current assets
Non-current assets fall into 3 broad categories based on whether they have a physical form, exist as legal rights, or come from the natural world.
Tangible assets
Tangible assets are physical items you can see and touch. They're sometimes called fixed assets or property, plant and equipment (PP&E). Common examples include office buildings, manufacturing machinery, delivery vehicles and office furniture.
Tangible assets lose value over time through wear and tear. You account for this through depreciation, which spreads the cost of the asset across its useful life.
Intangible assets
Intangible assets don't have a physical form but still hold value for your business. They include patents, trademarks, copyrights, goodwill and software licences.
Some intangible assets have a definite lifespan. A patent, for example, expires after a set number of years. Others, like a well-known trademark, can last indefinitely as long as you maintain them. You amortise intangible assets with a definite life over their useful period, while indefinite-life assets are reviewed regularly for impairment instead.
Natural resources
Natural resources include oil, gas, timber and mineral deposits that your business extracts and sells. These only count as non-current assets when your business is actively involved in extracting them.
As you extract natural resources, their value decreases through a process called depletion. This works similarly to depreciation but applies specifically to resources taken from the earth.
Non-current assets examples
Here are some common non-current assets that UK small businesses typically hold on their balance sheets.
- Land and buildings, such as an office, warehouse or retail premises
- Machinery and manufacturing equipment
- Company vehicles, including vans and delivery trucks
- Office equipment like computers, printers and phone systems
- Patents that protect your products or processes
- Trademarks on your business name or logo
- Goodwill from acquiring another business
- Long-term investments, such as shares held in another company for more than 1 year
- Software licences that cover multiple years
The specific non-current assets on your balance sheet depend on your industry. A construction company might hold heavy machinery, while a tech startup might list software and patents as its most valuable long-term assets.
Current vs non-current assets
The main difference between current and non-current assets is how quickly you can turn them into cash. Understanding this distinction helps you read your balance sheet clearly and manage your finances with confidence.
Here's how they compare.
- Liquidity: current assets convert to cash within 12 months, while non-current assets are held for longer than 1 year
- Balance sheet placement: current assets appear in their own section near the top, while non-current assets sit in a separate section below
- Value changes: current assets are usually recorded at their realisable value, while non-current assets are recorded at cost minus accumulated depreciation or amortisation
- Purpose: current assets fund your short-term obligations, while non-current assets support long-term revenue generation
- Examples: current assets include cash, trade debtors and stock; non-current assets include property, equipment and patents
It's also worth knowing about non-current liabilities. These are debts or obligations your business doesn't need to settle within 12 months, such as long-term loans, mortgages or lease commitments. On the balance sheet, non-current liabilities sit alongside non-current assets to give a fuller picture of your long-term financial position.
How non-current assets appear on the balance sheet
Non-current assets sit in their own section on the balance sheet, typically listed above current assets. They give lenders, investors and you as a business owner a snapshot of the long-term resources your business holds.
Each non-current asset is initially recorded at its original cost, including the purchase price and any costs to get it ready for use. Over time, accumulated depreciation or amortisation is subtracted from that original cost. The resulting figure is called the carrying value or book value.
For example, if you bought a piece of equipment for £10,000 and it has £3,000 of accumulated depreciation, its carrying value on your balance sheet is £7,000. Cloud accounting software like Xero can help track these values and keep your balance sheet up to date.
Depreciation and amortisation of non-current assets
Depreciation and amortisation are how you spread the cost of a non-current asset over the time you use it. The process matches the expense to the periods when the asset generates revenue for your business.
Depreciation applies to tangible assets like machinery, vehicles and office equipment. You estimate how long the asset will be useful, then allocate a portion of its cost as an expense each year. A common approach is straight-line depreciation, where you divide the cost evenly over the asset's useful life.
Amortisation works the same way but applies to intangible assets with a definite lifespan, such as patents or software licences. You spread the cost over the period the asset provides value.
If a non-current asset loses value unexpectedly, for example through damage or a drop in market conditions, you may also need to record an impairment. This is a one-off reduction in the asset's carrying value to reflect its lower recoverable amount.
Why non-current assets matter for your business
Non-current assets play a central role in how your business operates and grows. They're the tools, property and rights that help you earn revenue over the long term.
From a financial planning perspective, non-current assets matter for several reasons.
- They generate revenue over multiple years, supporting your long-term profitability
- Lenders often accept non-current assets like property or equipment as collateral when you apply for a loan
- The level of investment in non-current assets signals whether your business is growing, maintaining, or scaling back its operations
- Depreciation of non-current assets reduces your taxable profit each year, lowering your tax bill
In the UK, capital allowances let you deduct the cost of certain non-current assets from your profits before calculating tax. The Annual Investment Allowance (AIA), for example, allows you to claim tax relief on qualifying plant and machinery purchases. Keeping accurate records of your non-current assets helps you claim the right allowances and stay on top of your obligations.
Related terms
Learning about non-current assets connects to several other accounting concepts. Explore these related glossary terms to build your understanding.
Learn more about non-current assets
These Xero guides cover related topics to help you manage your business finances with confidence.
For definitions of other accounting and business terms, explore the full Xero glossary for More terms.
Handy resources
Advisor directory
You can search for experts in our advisor directory
Xero Small Business Guides
Discover resources to help you do better business
Financial reporting
Keep track of your performance with accounting reports
Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.