Corporation Tax Capital Allowances: Timing Your Investment
The government has confirmed that main-rate plant and machinery writing-down allowances (WDA) have reduced from 18% to 14% effective from 1 April 2026. However, a 40% first-year allowance (FYA) for plant and machinery came into effect from 1 January 2026 and remains available for qualifying purchases.
For tax planning purposes, this matters significantly. A first-year allowance gives 40% relief in year one on the cost of qualifying plant and machinery, substantially improving cash flow compared to spreading relief over several years at the reduced 14% WDA rate. Any company considering capital investment—new equipment, machinery, or business assets—should consider accelerating purchases before the FYA is potentially withdrawn or reduced in future budgets.
This is particularly important for Ltd companies with capital-intensive operations. The difference between claiming 40% relief immediately (FYA) versus claiming 14% annually (WDA) can mean tens of thousands of pounds in tax savings, depending on the scale of your investment and your company's tax rate.
Growth-stage companies and those planning expansion should discuss timing with their accountant now. The FYA rate may change in future budgets, and rates could tighten. Documenting purchases carefully and ensuring assets qualify for the relief is also essential to avoid HMRC challenges.
Read the full technical guidance on GOV.UK's overview of tax legislation and rates.