Full expensing – Are you missing out?
Full expensing was introduced in 2023 as a major change to capital allowances, allowing businesses to deduct the full cost of qualifying plant and machinery from their taxable profits in the year of purchase, rather than spreading the relief over several years.
Initially planned as a temporary measure until 2026, the Government has now confirmed that full expensing will remain in place until at least 5 April 2027, giving businesses greater certainty in their investment planning.
How does full expensing work?
Full expensing allows businesses to claim 100 per cent capital allowances on qualifying purchases each year, with no limit on how many times it can be applied. To qualify, purchases must be:
- New and unused
- Main rate plant and machinery
- Bought outright, on hire purchase, or leased
- Not a car
Making the most of full expensing
Although full expensing is now a permanent feature of the tax system, it is only guaranteed until April 2027.
If you are planning significant investments in plant and machinery, it could be wise to act before this date to secure the relief.
You may also wish to spread larger investments across multiple tax years to protect your cash flow and working capital.
By offsetting the cost of major purchases against your Corporation Tax bill, full expensing can make your investments more affordable and support your business growth plans. This tax saving could also improve your position when negotiating with lenders, thanks to the reduced effective cost of capital.
Claiming full expensing is simple, as it is included in your Company Tax Return under capital allowances, with no additional forms required.
As with any major financial decision, it is worth seeking professional advice to ensure compliance and to maximise the benefit to your business.
Our team is on hand to help you plan your investments and make the most of the reliefs available to you.
