The Chancellor announced a further reduction to the writing down allowance with effect from 1 April 2027 (Corporation Tax) or 6 April 2027 (Income Tax). The rate is reducing to 12% from 14%. This will lengthen the time before full tax relief is obtained on capital expenditure if it cannot be claimed via the Annual Investment Allowance (AIA) or Full Expensing (FE). There were no changes announced to these two allowances.
However, the First Year Allowance, which was introduced at Budget 2025, is being increased to 50% from 40% for qualifying expenditure incurred after 1 January 2027.
This allowance can be useful to unincorporated businesses whose capital expenditure exceeds the £1million AIA. It can also be utilised by lessors and hire businesses which are otherwise restricted as to the capital allowances they can claim.
There was no announcement about a further extension to the current regime whereby zero emission cars (and charging points) can claim a 100% first year allowance. This would appear to mean that from 1 or 6 April 2027 capital allowances will only be claimed at 12%.
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