Tax allowances for business investment
Making the most of your investment
Companies can qualify for a 100% first-year allowance, which effectively means full expensing for qualifying capital expenditure. There is also a 50% first-year allowance for special rate pool expenditure. Both of these allowances have now been made permanent.
For unincorporated businesses, the high annual investment allowance for plant and machinery means that in most cases there is also full expensing of capital expenditure. The government recently announced that the £1,000,000 annual investment allowance limit has been made permanent.
Where such generous reliefs are not available, it is important that you benefit from any other available tax relief for capital expenditure.
The October 2024 Budget confirmed that both the 100% first-year allowance for companies and the annual investment allowance are to be retained for the foreseeable future. The government is also planning to provide clarity on what expenditure qualifies for the different capital allowances.
From 6 April 2024, capital allowances are no longer relevant for many sole traders and partnerships because the cash basis is now the default method for calculating trading profit.
