Capital allowances

Capital allowances

FORTHCOMING CHANGES: At Budget 2025, the government announced the introduction through Finance Bill 2026 of:

•
a reduction in the rate of writing-down allowances on main pool plant and machinery from 18% to 14% with effect from 1 April 2026 for corporation tax purposes and 6 April 2026 for income tax purposes—this affects both companies and unincorporated businesses with pools of main rate expenditure (eg those with expenditure that does not qualify for, or pre-dates, the introduction of first-year allowances (FYAs) such as the super-deduction and full expensing)
•
the introduction, for expenditure incurred from 1 January 2026, of a new 40% FYA for qualifying main rate expenditure that has reduced restrictions compared with other FYAs—this is expected to be beneficial primarily for expenditure that is not otherwise eligible for the £1m annual investment allowance (AIA) or existing FYAs (such as full expensing)—the 40% FYA will apply to all businesses (not only companies) and it will include expenditure on assets used for leasing (but not overseas leasing), but expenditure on cars and second-hand assets will be excluded, and
•
an extension to the 100% green first-year allowances for qualifying

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