Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Capital allowance definition

What does Capital allowance mean? A capital allowance is tax relief that lets a business deduct qualifying capital expenditure from trading profits when computing corporation tax (companies) or income tax (sole traders and partnerships), since capital costs are not normally revenue‑deductible. In practice it is a statutory regime: in the UK (including England & Wales, Scotland and Northern Ireland) under the Capital Allowances Act 2001 and Finance Acts; in Ireland under the Taxes Consolidation Act 1997. Key features include: - Relief for plant and machinery (including integral features and most equipment), certain cars, and structures and buildings. - Mechanisms such as Annual Investment Allowance (AIA), writing‑down allowances...

UK green enhanced capital allowances (first-year allowances): eligibility, qualifying assets, exclusions, claims, and Budget 2025/Finance Bill 2026 changes

Published by a LexisNexis Tax expert

Practice notes

FORTHCOMING CHANGES:

At Budget 2025, the government set out measures to be legislated in Finance Bill 2026:

Cutting the writing-down allowance rate for main pool plant and machinery from 18% to 14%, effective 1 April 2026 for corporation tax and 6 April 2026 for income tax. This impacts companies and unincorporated businesses with main rate pools, for example where spend does not qualify for, or predates, first-year allowances (FYAs) such as the super-deduction and full expensing.
Introducing a new 40% FYA for qualifying main rate expenditure incurred from 1 January 2026, with fewer restrictions than other FYAs. It is expected to help chiefly where spend is not covered by the £1m annual Investment allowance (AIA) or existing FYAs (including full expensing). The 40% FYA will be available to all businesses (not just companies) and will include assets used for leasing (excluding overseas leasing), but cars and second-hand assets will not qualify.
Extending the 100% green first-year allowances for qualifying spend on zero-emission cars and electric vehicle charging points by one year to 31 March 2027...

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Web page updated on 22/05/2026

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