- Businesses to benefit from new 40% first-year allowance that
supports investment and growth – effective from today, 1 January
2026
- New relief allows businesses to save tax on new plant and
machinery in first year
- Supports UK's position as one of the most generous and
competitive capital allowances regimes in the world
First announced by the Chancellor at Budget 2025, the government
is continuing to offer greater upfront tax reliefs for businesses
with a new 40% permanent first-year allowance for main-rate plant
and machinery.
This new relief follows calls from businesses to expand full
expensing to more assets and businesses, and will mean businesses
can deduct much of the cost of their investment in the year they
make that investment, cutting their tax bill.
Chancellor of the Exchequer, , said:
Saving tax for businesses that are investing is key to building
the confidence needed to boost growth. We are building on the
UK's capital allowance regime – one of the most generous in the
world – alongside capping Corporation Tax and enabling more scale
ups to attract investment to help create a tax system that
supports growth.
This will be available for assets bought for leasing and for
unincorporated businesses, which do not benefit from full
expensing, while preserving the current incentives to invest.
Full expensing allows companies to claim 100% capital allowances
on qualifying main rate plant and machinery investments, such as
warehouses or construction equipment, which means a company can
deduct the entire cost of its investment from its taxable profits
in year one, so that for every pound invested its taxes are cut
by up to 25p.
The UK has one of the most generous and competitive capital
allowances regimes in the world and is top of the rankings of
OECD countries for plant and machinery capital allowances.
In line with the commitments made in the 2024 Corporate Tax
Roadmap, the government has maintained the parts of the UK
Corporate Tax offer that are most important for attracting new
investment. This includes capping Corporation Tax at 25% for the
rest of this Parliament, the lowest in the G7, and the generous
full expensing offer.
Further information
- To ensure this new relief is introduced in a fiscally sound
way, at Budget the Chancellor also announced a reduction in the
main rate writing-down allowance (WDA) from 18% to 14% from April
this year.
