Who needs to know about full expensing?
Unveiled in the Spring Budget, it’s the highlight of what the government calls its new ‘capital
allowances offer’. But what is full expensing? And will it benefit your business?
Full expensing can be used for expenditure incurred by companies on or after 1 April 2023 and before
1 April 2026. At present, it’s temporary though the government aims to make it permanent as soon
as it can. It permits a 100% claim for capital allowances on the purchase of qualifying plant and
machinery, so that the cost of investment gets written off in one go, in the year of purchase. It
applies to qualifying new main rate plant and machinery: in particular, plant and machinery must be
new and unused; must not be a car; must not be given to the company as a gift, or bought to lease to
For certain other types of plant and machinery, long life assets, and integral features of buildings,
which don’t qualify for full expensing, a 50% first-year allowance can be claimed. This allowance
comes with the same conditions as full expensing. Relief on the balance of expenditure comes in
subsequent accounting periods and is given at the 6% rate of writing down allowances for special rate
In practice, full expensing will impact only a limited number of businesses. It’s a tax relief for
companies, not unincorporated businesses or partnerships. And it’s a change that matters almost
exclusively to companies planning capital expenditure over £1 million - the Annual Investment
Allowance (AIA) limit.
It’s not just companies that have to get to grips with new rules on capital allowances. There’s
change as well for unincorporated businesses and partnerships. For some years, the AIA limit has been
set temporarily at £1 million. This has put pressure on businesses to get major capital expenditure
into the window before the £1 million limit fell.
The good news is that the limit is now permanent. Most businesses should now be able to claim 100%
first-year relief for expenditure on qualifying plant and machinery. It’s worth noting in passing
that tax relief on the purchase of cars doesn’t come via the AIA. It’s given through writing down
allowances, with rates determined by CO2 emissions and date of purchase. Enhanced capital
allowances are available for new and unused electric cars.
When you time capital sales and purchases can be critical, so for the optimal tax outcome, we always
recommend advance preparation. Together, we can help your business plan for the future. Do please get