Background. Mental capacity is now a core part of UK mental health law and clinicians will increasingly be expected to assess it. Because it is a legal concept there is a need to clarify associations with variables that clinicians are more familiar with, especially insight. Method. In this cross-sectional study we recruited consecutive psychiatric admissions to the Maudsley Hospital, London. We carried out structured assessments of decision making using the MacArthur Competence Assessment Tool for Treatment (MacCAT-T), resulting in a clinical judgement about capacity status. We analysed associations with a range of sociodemographic and clinical variables, including insight score on the Expanded Schedule for the Assessment of Insight (SAI-E). The same variables were compared in an analysis stratified according to diagnostic group: psychotic disorders/bipolar affective disorder (BPAD)/non-psychotic disorders. Results. Psychotic disorders and manic episodes of BPAD are most strongly associated with incapacity. In such patients, insight is the best discriminator of capacity status. In patients with non-psychotic disorders, insight is less strongly associated with capacity; in this group depressed mood discriminates capacity status whereas it does not in psychotic disorders. Cognitive performance does not discriminate capacity status in patients with psychotic disorders. Conclusions. Mental capacity has complex relationships with psychopathological variables, and these relationships are different according to diagnostic group. Insight is the best discriminator of capacity status in psychotic disorders and BPAD but not in non-psychotic disorders.