What changed?
The main-rate first-year allowance is 40%, while the main writing-down allowance is higher than the proposed 12% rate.
Finance Bill 2026–27 will raise the main-rate first-year allowance to 50% for expenditure from 1 January 2027 and reduce the main writing-down allowance to 12% from April 2027.
Practical consequence: Businesses should separate qualifying first-year expenditure from pool balances and model the different Corporation Tax and Income Tax commencement dates.
What happened?
Budget 2026 proposes changing the timing of UK capital-allowance relief. The main-rate first-year allowance would rise to 50%, while the continuing main writing-down allowance would fall to 12%.
Key details
The 50% first-year allowance is planned for qualifying expenditure incurred on or after 1 January 2027. The 12% writing-down rate would apply from 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax. The measure is intended for Finance Bill 2026–27 and is not yet enacted.
Who is affected?
Companies, unincorporated businesses and investors planning qualifying plant and machinery expenditure may be affected. Eligibility depends on the asset, taxpayer and other available reliefs.
Effective date / timing
First-year allowance: expenditure from 1 January 2027. Writing-down allowance: 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax, subject to enactment.
Why it matters
The proposal changes when deductions are obtained. It can accelerate relief for eligible new expenditure while slowing relief on balances that remain in the main pool.