The Autumn Budget 2026 announced changes to the tax relief available to businesses investing in plant and machinery. The Government will increase the main rate first-year allowance to 50% for qualifying expenditure incurred from 1 January 2027, while reducing the main rate writing-down allowance from 14% to 12% from April 2027. The changes will be legislated for in Finance Bill 2026-27.
The increased first-year allowance will allow businesses to deduct 50% of qualifying expenditure on eligible plant and machinery from their taxable profits in the year the expenditure is incurred. This will provide faster tax relief for businesses making investments in qualifying equipment. The allowance is particularly relevant where other forms of relief, such as the Annual Investment Allowance or full expensing, are not available or are not used. Eligibility conditions and exclusions apply.
The reduction in the writing-down allowance means that businesses using the main rate pool will receive tax relief at a lower annual rate. The main rate pool covers most qualifying plant and machinery, while certain assets, including some integral building features and longer-life equipment, fall into a special rate pool. The main rate writing-down allowance is currently 14% but will fall to 12%. The change will take effect from 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax. No changes were announced to the special rate which is set to remain at 6%.
