Spring Budget 2023 - Capital allowances

Posted on 15th March 2023 by Streets Capital allowances


Image to represent Spring Budget 2023 - Capital allowances

Designed in part to help offset the increased Corporation Tax main rate, the Chancellor announced the introduction of a new ground-breaking 100% first-year capital allowance for qualifying plant and machinery assets. This measure is also expected to help boost business investment and growth.

The new measure, known as full expensing, will initially apply from 1 April 2023 until 31 March 2026 although the Chancellor suggested that it may be made permanent in due course. The measure builds on the success of the super-deduction which ends on 31 March 2023. Under full expensing, for every pound a company invests, their taxes will be cut by up to 25p.

To qualify for full expensing, expenditure must be incurred on the provision of “main rate” plant or machinery. It should be noted that full expensing is available to companies subject to Corporation Tax only. 

Plant and machinery that may qualify for full expensing includes (but is not limited to):

  • machines such as computers, printers, lathes and planers
  • office equipment such as desks and chairs
  • vehicles such as vans, lorries and tractors (but not cars)
  • 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.

For “special rate” expenditure, that doesn’t qualify for full expensing, a 50% first-year allowance (FYA) can be claimed instead. The 50% FYA was introduced alongside the super-deduction and was due to end on 31 March 2023. It will now be extended by three years to 31 March 2026.

Businesses can also continue to use the Annual Investment Allowance (AIA) to claim a 100% tax deduction on qualifying expenditure on plant and machinery of up to £1m per year. This includes unincorporated businesses and most partnerships.


No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.

Information

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.


Expert insight and news straight
to your inbox

Related Articles


Types of tax allowances for capital expenditure

Capital allowances enable businesses to claim tax relief on certain capital expenditures. Different rules apply to various types of capital expenditure, and the amount you can claim depends on the specific capital allowance you use. If an item is


Invest and save tax

The Annual Investment Allowance (AIA) is a generous tax relief that allows for the total amount of qualifying expenditure on plant and machinery to be deducted from your profits before tax. The AIA can be claimed by an individual, partnership or company carrying on a trade, profession ...


Repairs or replacement of business assets

The term 'capital allowances' is used to describe the allowances available to businesses to secure tax relief for certain capital expenditure. The rules that govern the purchase of capital equipment such as computer equipment, vehicles and machinery by businesses are different to those for day to day business ...

You might also be interested in...