What is full expensing?

Full expensing is a UK tax relief for companies buying new plant and machinery. They can deduct 100% of the cost from taxable profits in the year they buy it. Introduced in April 2023 and made permanent that November, it is designed to encourage businesses to invest in equipment.

Normally, businesses spread tax relief on equipment over many years through capital allowances. In 2026/27, the main writing down allowance is 14% a year. Full expensing lets companies claim the whole cost upfront, which improves cash flow and reduces corporation tax sooner. For example, a company that spends £1 million on new machines can reduce its taxable profits by £1 million that year. At the 25% main rate, that cuts its tax bill by £250,000.

Full expensing covers new main-rate plant and machinery, such as machines, computers and vans. A 50% first-year allowance applies to special-rate assets, such as long-life equipment. It is only for companies paying corporation tax, not sole traders or partnerships. From January 2026, a 40% first-year allowance also covers some assets that full expensing does not, including items for leasing.

Smaller businesses can also use the Annual Investment Allowance, which gives 100% relief on up to £1 million of spending. Business groups strongly support full expensing as a boost to investment and productivity. Critics note it costs billions of pounds a year and question whether it changes how much firms actually invest.

Who it affects: Companies investing in plant and machinery