The full expensing 100% first-year capital allowance for qualifying plant and machinery assets came into effect on 1 April 2023. To qualify for full expensing, expenditure must be incurred on the provision of “main rate” plant or machinery. It should be noted that full expensing is only available to companies subject to Corporation Tax.
Plant and machinery that may qualify for full expensing includes (but is not limited to):
- machines such as computers, printers, lathes and planers;
- office equipment such as desks and chairs;
- vehicles such as vans, lorries and tractors (but not cars);
- warehousing equipment such as forklift trucks, pallet trucks, shelving and stackers;
- tools such as ladders and drills;
- construction equipment such as excavators, compactors, and bulldozers; and
- fixtures such as kitchen and bathroom fittings and fire alarm systems in non-residential property.
Full expensing currently applies from 1 April 2023 until 31 March 2026 although this may be extended. The super-deduction that was introduced during the pandemic ended on 31 March 2023. Under full expensing, for every pound a company invests, their taxes will be cut by up to 25p.
For “special rate” expenditure, which does not qualify for full expensing, a 50% first-year allowance (FYA) can be claimed. The 50% FYA was introduced alongside the withdrawn super-deduction and was due to end on 31 March 2023, but this 50% FYA has now been extended until 31 March 2026.
Businesses can also continue to use the Annual Investment Allowance (AIA) to claim a 100% tax deduction on qualifying expenditure on plant and machinery of up to £1m per year. This includes unincorporated businesses and most partnerships.