Capital allowances - New rules for a new tax year

Capital allowances continue to provide an effective method for businesses to reduce their tax bills, by providing incentives for investment in eligible expenditure – typically plant and machinery.


Historically, these reliefs have been subject to change and the 2026/27 tax year is no different, as the Government moves to alter two key reliefs – Writing Down Allowance (WDA) and a new First-Year Allowance (FYA).



Reduction of the Writing Down Allowance

 

The WDA will be reduced from 18 per cent to 14 per cent on the main pool of qualifying plant and machinery assets.


This change has been introduced on two different dates, starting with companies subject to Corporation Tax on 1 April and followed shortly thereafter by those subject to Income Tax, such as sole traders and partnerships, from 6 April.


Businesses with large brought forward main pool expenditures are expected to lose the most from the reduction in the main rate of WDA.


In the long-term, the change may also reduce incentives for investment in second-hand assets and cars, which benefited under the previous rules.


The new First-Year Allowance


To offset some of the impact of the reduction in WDA, a new 40 per cent FYA on main rate expenditure, primarily still covering plant and machinery, will now be available.


This new FYA is intended to encourage investment in areas where other FYAs don’t allow, in particular, assets bought by unincorporated businesses and leases.


Sole traders and partnerships will, for the first time, be able to get additional support at the point of investment, which means that more businesses will be able to reduce their tax bill in the same year as their investment.


This is expected to give a quick cashflow boost to those affected and provide additional support for future investments.


However, it is important to note that this FYA does not support investment in second-hand assets, cars or leased assets in other countries.


Finally, the Government has also confirmed that small business owners will continue to benefit from tax relief on electric vehicles, as the 100 per cent FYA for zero-emission vehicles and charge points has been extended until 31 March 2027 for Corporation Tax and 5 April 2027 for Income Tax.


This gives businesses greater certainty when planning ahead, while also providing a strong financial incentive to invest by reducing tax bills upfront.


Want to make more of capital allowances?


If you think you may be eligible for capital allowances, either due to the changes outlined in this article or more generally, then it is important that you claim the tax relief available to you.


If you would like help reviewing the current capital allowances that your business can claim, please get in touch. 

Mixed picture for UK mergers and acquisitions– Where do the opportunities lie?

By Charlie Flockhart • July 21, 2026
Mergers and Acquisitions (M&A) are a core part of business growth and resilience. Done well, the acquiring business benefits from a new market and the other company gets access to additional resources and support. Government data has shown changes in the value of UK M&As, so it is necessary to understand how opportunities may manifest in the future. How are mergers and acquisitions changing in the UK? The Office for National Statistics (ONS) recently published data concerning M&As and the picture is mixed. Compared to the previous quarter, the first quarter of 2026 saw a notable fall in the number of M&As, dropping from 495 to 352. Inward M&As, those deals wherein foreign businesses acquired UK businesses, saw an £18.8 billion reduction in value, as it was only £14.2 billion compared to the previous quarter’s £33 billion. Domestic M&As, those conducted between UK businesses, took a slightly smaller hit of £0.4 billion, resulting in a value of only £1.5 billion compared to the previous £1.9 billion. Outward M&As bucked the trend as UK businesses acquiring overseas companies saw a £1.7 billion increase in value, taking the £3 billion generated in the last quarter to £4.7 billion. What opportunities are there for mergers and acquisitions in the UK? For UK businesses unsure about expanding overseas, the data might make the case that it is a worthwhile endeavour. Using M&As to expand internationally gives UK businesses access to people who understand the market, language and culture needed to succeed in a new territory. This will involve engaging with the existing team and learning from their lived experiences. For businesses focused only on UK growth, M&As remain a viable expansion strategy even as value fluctuates. It is worth remembering that the value of a business at the point where an M&A completes is not necessarily indicative of its long-term value, as your efforts could be the key to greater future growth once you have a place in that market. Looking to expand your business? Our team can help you understand all aspects of an M&A to ensure you are best positioned to find sustainable growth for your business and then support you through the process. If you want to make the most of the opportunities mergers and acquisitions present, get in touch with our team .

Should I gift a lump sum from my pension to family? Understanding the Inheritance Tax implications

By Charlie Flockhart • July 20, 2026
You are likely aware of the upcoming inclusion of unspent pension pots for Inheritance Tax (IHT) calculations from 6 April 2027. This has sparked a wave of interest in finding alternative ways to save for the future. While it might seem necessary to reduce the amount contained in your pension pot, there are tax implications that must be considered. Is it a good idea to gift a lump sum from my pension? Accessing a lump sum of your pension can be useful for a range of reasons, as you or your loved ones could benefit from the money you have saved over years of work. However, IHT is not the only tax implication of accessing pension lump sums, as these can be subject to Income Tax. You can access up to 25 per cent of your pension tax-free and the most you can take across all pensions tax-free is £268,275 – a figure that only concerns those with pensions worth more than £1,073,100. If you are under 75 and expected to live less than a year because of serious illness, you may take all of the money from your pension in a lump sum without paying tax, provided it is below the lump sum and death benefit allowance. Knowing what is possible to withdraw then allows you to determine whether gifting is a viable strategy. What are the tax implications of gifting a lump sum from my pension? Gifting can reduce IHT exposure, even to nil, but the rate of tax exemption is determined by when the gift was given in relation to when you die. The rates are as follows: 

Employee Ownership Trusts – What business owners need to know

By Charlie Flockhart • July 20, 2026
With more than 2,400 businesses now operating through an Employee Ownership Trust (EOT) structure, this has become a mainstream option for business owners thinking about succession and exit. The tax benefits that helped drive that growth have recently changed, but EOTs remain a competitive succession route. For many owners, the financial case was never the only consideration. What is an Employee Ownership Trust?  An EOT is a structure through which a company becomes majority-owned by a trust on behalf of its employees. The existing shareholders sell a controlling stake to the trust, which holds those shares for the collective benefit of the workforce. Employees do not buy shares directly. Instead, they benefit through profit-sharing arrangements and a genuine stake in the long-term success of the business. For the selling owner, it is a way to exit on their own terms while keeping the company’s culture and identity intact. Capital Gains Tax (CGT) relief changes to EOTs Until November 2025, qualifying owners could sell to an EOT and pay no Capital Gains Tax (CGT) on the gain, but that has now changed. For disposals completing on or after 26 November 2025, 50 per cent of the gain is exempt from CGT, with the remaining 50 per cent taxed at the individual’s prevailing rate. Business Asset Disposal Relief (BADR) and Investors’ Relief cannot be used alongside EOT relief to reduce the chargeable portion further. For higher-rate taxpayers, the effective CGT rate on an EOT sale is around 12 per cent. This is still well below the 24 per cent that applies to most other business disposals. The 2025 Budget also introduced a requirement for trustees to take all reasonable steps to ensure the price paid does not exceed market value, making a robust and defensible valuation more important than ever. Why use an EOT as part of your exit strategy? Tax efficiency is one factor, but it is rarely the only one. Many owners are drawn to EOTs because there is no external buyer imposing a new direction, no protracted trade sale negotiations and a genuine sense that the business and its people will be looked after. Profit-sharing arrangements also tend to improve engagement, retention and productivity, which support the business through the transition and beyond. Is an EOT right for your business? EOTs tend to work best where there is a strong management team capable of running the business after the transition and a workforce with genuine engagement. They suit owners whose priorities go beyond maximising the headline sale price. The process involves obtaining an HMRC-compliant valuation, preparing financial forecasts to show the business can meet deferred consideration over time and working with specialist advisers to structure the transaction correctly. If you are exploring your exit options and want to understand whether an EOT could be the right fit, please get in touch with our team .