Full expensing made permanent for companies

In a major boost for business investment, the government has made 'full expensing' a permanent feature of the tax system. This allows companies to deduct 100% of the cost of qualifying plant and machinery from their taxable profits in the year of purchase.

This provides significant cash flow benefits and certainty for businesses looking to invest in new equipment, technology, and infrastructure to drive productivity and growth.

How full expensing works

Under full expensing, if a company spends £100,000 on qualifying equipment, it can deduct the full £100,000 from its taxable profits in that same accounting period. At the current main Corporation Tax rate of 25%, this equates to a tax saving of up to £25,000. This is a significant improvement over the old system, where the cost of many assets had to be written down gradually over several years.

What assets qualify?

The relief applies to 'main pool' plant and machinery. This includes a wide range of assets such as computer equipment, servers, office furniture, commercial vehicles (vans, lorries, and tractors), and manufacturing machinery. It does not apply to cars, land, buildings, or assets purchased for leasing to others.

Special rate assets

For assets that fall into the 'special rate pool'—such as integral features of a building (e.g., electrical systems, air conditioning) or long-life assets—a 50% first-year allowance is available instead. The remaining 50% is then written down at the standard 6% rate in subsequent years.