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. 

The hidden savings tax trap and why changes to ISAs make it harder to put money away

By Charlie Flockhart • June 4, 2026
Do you know what your Personal Savings Allowance is? While most taxpayers in the UK will know the thresholds for Income Tax, a worrying few know the way in which personal savings can be subject to tax. With ISAs set for a significant overhaul, understanding the less tax-efficient saving options will soon be more important. How much tax do you pay on your savings? While your savings are not taxed, any interest generated by those savings could be subject to tax if it exceeds your Personal Savings Allowance. Depending on the rate of Income Tax you pay, your Personal Savings Allowance will differ. The thresholds are: £1,000 for Basic-rate taxpayers £500 for Higher-rate taxpayers £0 for Additional-rate taxpayers ISAs remain the more tax-efficient saving strategy as the interest generated from them is tax-free. It is therefore most effective to utilise the full £20,000 saving limit for an ISA as early in the tax year as possible to benefit the most from the accumulation of interest. How should tax on savings be managed? The main issue is that tax on savings is often overlooked, resulting in HMRC taking action for underpaid taxes. This will often manifest in a charge through PAYE, as employees are more likely to overlook this obligation. Those filing Self Assessment tax returns should already be declaring interest earned, so any compliance issue in that group points to a wider problem with handling tax obligations. When attempting to make the most of saving strategies, it is best to seek professional financial advice. This will be more important if the saving limit for Cash ISAs falls to £12,000 for under-65s in 2027 as proposed, leaving younger savers to have to find new ways to grow their wealth. Our professional team can help you to determine an effective saving strategy that suits your financial goals while helping you to be mindful of the tax obligations that you may face. We do not want to see anyone caught off-guard by an unexpected tax bill and understanding your exposure is vital for preventing this. Get in touch with our team to regain confidence in your saving strategy.

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By Charlie Flockhart • June 4, 2026
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Government summer savings spree adds complexity to VAT for hospitality and tourism

By Charlie Flockhart • June 4, 2026
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