Capital allowances update Budget 2025

For 2026/27, the continued availability of the annual investment allowance (AIA) means that qualifying new capital expenditure you make of up to £1 million can be relieved in full against the taxable profits of your business.

Disappointingly, Budget 2025 announced that the rate of writing down allowance applicable to qualifying capital expenditure that is classed as main rate pool will drop from 18% to 14% on 1 April 2026 for companies and 6 April 2026 for unincorporated businesses, such as sole traders and partnerships.

A new 40% first year allowance (FYA) will be available from 1 January 2026. But its usefulness to your business may be limited, though, as it will only really be of benefit where the AIA or other FYAs are unavailable.

If you are considering buying electric vehicles for your business, Budget 2025 confirmed that FYAs that give 100% relief for qualifying expenditure on electric vehicles and charging points will be extended to April 2027.

It may be necessary to re-examine your business plans for 2026 and beyond to be as tax-efficient as possible. Remember, we are here to support you to ensure your business success. Please do get in touch, call Alan Rolfe on 023 8046 1235 or email Alan Rolfe.