Capital allowances

FORTHCOMING CHANGE: At Spring Budget 2024, the government confirmed that it will publish draft capital allowances legislation for consultation to seek views on a potential extension of full expensing (ie the 100% first-year allowance for main rate plant and machinery assets) and the 50% first-year allowance for special rate assets to include plant and machinery assets for leasing. In addition, the government announced at Autumn Statement 2023 that it will consult on the wider legislative implications of the introduction of these first-year allowances.

For more information, see News Analysis: Autumn Statement 2023—Tax analysis and Spring Budget 2024—Tax analysis.

Capital allowances are a form of corporation tax or income tax relief for some, but not all, capital expenditure. A business will reduce, or write down, the value of many of its capital assets in its accounts year by year using a process known as depreciation or amortisation. Accounts depreciation is generally not tax-deductible. In its tax return, the business will replace depreciation with capital allowances, which can be used to reduce taxable profits.

Tax relief is not necessarily given in full at the time the expenditure