Measure
The government is reducing the main rate of writing-down allowance for plant or machinery from 14% to 12%. It is also increasing the 40% first-year allowance for main rate assets to 50%. This first-year allowance applies to new expenditure on eligible assets, including most plant or machinery for leasing, but excludes second-hand assets, cars, and assets leased overseas.
Companies within the charge to corporation tax, as well as income tax payers, incurring capital expenditure on plant and machinery. The 50% first-year allowance will benefit businesses that cannot access full expensing, such as leasing and hire businesses, as well as unincorporated businesses (e.g. partnerships of individuals).
The 50% first-year allowance will take effect in respect of expenditure incurred on eligible plant and machinery from 1 January 2027.
The reduced 12% main rate writing-down allowance will be effective from 1 April 2027 for corporation tax and 6 April 2027 for income tax.
The reduction in the main rate of writing-down allowance will impact businesses with large brought-forward main pool balances and those who cannot benefit from full expensing, as they will receive relief at a lower rate on their residual main pool amounts going forward.
The increase in the 40% first-year allowance for main rate assets to 50% is a further acceleration of relief for the leasing industry and other taxpayers such as partnerships of individuals and other unincorporated businesses, that are unable to benefit from full expensing. This will help such businesses to moderate the effect of the lowering of the main writing-down allowance rate. The maintenance of full expensing and the annual investment allowance should ensure eligible businesses remain incentivised to invest going forward.