Tax breaks including full expensing, capital allowances and help with funding for equipment and machinery

Companies can write off the entire cost of investment in one go, giving rise to a tax cut of up to 25p for every £1 invested. For example, a company incurring £1.5m on new machinery can deduct the entire amount in the tax year of purchase, potentially saving £375,000 in tax if taxed at the main Corporation Tax rate of 25%.

Full expensing replaces the super-deduction, which provided a 130% tax relief but expired on the 31st March 2023. Although the super-deduction offered a higher rate of relief, the cash value of the full expensing relief is approximately the same due to the recent increase in the Corporation Tax rate to 25%.

This means that rather than claiming capital allowances and pooling expenditure, relief is provided in full as if it was an expense in the profit and loss account of a business.

Below is a list of plant and machinery that full expensing relief applies (but not limited) to:

• Machines such as computers, printers, lathes and planers
• Office equipment, such as desks and chairs
• Vehicles such as vans (commercial vehicles), lorries and tractors (but not cars and some double cab pick up trucks)
• Warehousing equipment such as forklift trucks, pallet trucks, shelving and stackers
• Tools such as ladders and drills
• Construction equipment such as excavators, compactors and bulldozers
• Some fixtures such as kitchen and bathroom fittings and fire alarm systems in non-residential property

If the assets you want to acquire do not qualify for full expensing, then there are still other capital allowance alternatives to consider:

• Annual Investment Allowance (AIA) – this provides 100% first-year relief for plant and machinery investments up to £1 million and is available for all companies and the majority of partnerships. Also the purchasing of second-hand assets and those bought to lease to a third party can still qualify for this.
  Unincorporated businesses and most partnerships can still benefit from the AIA.
• 50% First Year Allowance (FYA) – The 50% first-year allowance for expenditure by companies on new special rate longer life assets until 31 March 2026. This includes assets with integral features such as solar panels, air-conditioning and heating units.

Funding qualifying purchases

If you are considering funding a qualifying purchase using asset finance then our experienced Banking & Finance team at Streets Financial Consulting Limited can assist you in obtaining a no obligation quote using their comprehensive panel of lenders.

You may also like to know that you might able to refinance existing assets to benefit your working capital. Again, Streets’ Banking & Finance team can help with this too. For further information please contact Martyn Shakespear, Head of Banking & Finance at mshakespear@streetsfc.com or Tina Hayes, Associate Director, Banking & Finance thayes@streetsfc.com.