Full expensing is a first-year capital allowance for companies. A company may be able to claim if it is subject to Corporation Tax and incurred the expenditure on or after 1 April 2023. [1] It lets the company deduct 100% of the cost of qualifying plant and machinery from its profits before tax in the year it was bought. [2] For special rate plant or machinery, half of the cost can be deducted under the 50% first-year allowance when working out taxable profits.
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What is full expensing?
Full expensing is a first-year capital allowance that lets a company deduct 100% of the cost of qualifying plant and machinery from its profits before tax in the year it was bought. [2] The 50% first-year allowance lets a company deduct 50% of the cost from its profits before tax in the year it was bought.
Whether a purchase may support capital allowance claims depends on what the item is, how it was acquired and which allowance fits it best.
Full expensing is a deduction from profits before tax, so it reduces the profits that Corporation Tax is worked out on rather than repaying the purchase cost.
How full expensing fits with other capital allowances
The phrase describes a relief rather than a charge. Capital allowances are a type of tax relief for businesses that lets them deduct some or all of the value of an item from their profits before they pay tax.
Capital allowances can be claimed on equipment and machinery, which are known as plant and machinery. Full expensing is one of several plant and machinery allowances, alongside the annual investment allowance, other first-year allowances and writing down allowances.
Writing down allowances can be claimed where plant and machinery does not qualify for another allowance, or where value remains after claiming the maximum amount of another allowance. That makes them the fallback for spending that full expensing does not reach.
Who can claim full expensing, and what about Income Tax?
Only companies can claim full expensing and the 50% first-year allowance. A company may be able to claim if it is subject to Corporation Tax and incurred the expenditure on or after 1 April 2023. [1]
So a business paying Income Tax, such as a sole trader or partnership, cannot deduct capital spending through full expensing, although capital allowances as a whole are a relief for businesses. A sole trader or partnership using the cash basis can only claim capital allowances on business cars.
For businesses relying on writing down allowances, the main rate of writing down allowance changed from 18% to 14% on 1 April 2026 for Corporation Tax and on 6 April 2026 for Income Tax. [4]
If an accounting period includes the date the main rate of writing down allowance changed, a hybrid rate needs to be worked out for that accounting period. [4]
Which plant and machinery qualifies for full expensing?
What counts as plant and machinery depends on the nature of the business. Plant and machinery includes alterations to a building to install plant or machinery, but not repairs.
To qualify for full expensing or the 50% first-year allowance, the plant or machinery must be new and unused, and must not be a gift, a car (although other vehicles may qualify for full expensing), bought to lease to someone else (unless it is background plant or machinery within a building), or purchased in the accounting period the business activity ceases. The guide to capital allowances on cars covers how cars are treated.
A company that leases out commercial property may be able to claim for background plant or machinery in the leased buildings. These are the things installed in a building to make it usable, and they include (but are not limited to) lighting, wiring and central heating.
Main rate, special rate and the AIA alternative
For main rate plant or machinery, all of the cost can be deducted under full expensing when working out taxable profits. For special rate plant or machinery, half of the cost can be deducted under the 50% first-year allowance, and the balance is added to the special rate pool in the following accounting period to claim writing down allowances.
Expenditure on special rate plant or machinery may qualify for the 100% annual investment allowance instead of the 50% first-year allowance. The guide to the Annual Investment Allowance explains how that allowance works.
Where expenditure qualifies for more than one type of plant and machinery allowance, a company can choose which to claim, but it cannot claim more than one allowance on the same amount of expenditure. In HMRC's example, a company claims £250,000 of full expensing on new laptops, uses the AIA on its new electrical system and part of its new solar panels, and claims the 50% first-year allowance on the remaining £100,000 spent on the panels. [3]
Claiming full expensing on the Company Tax Return
Full expensing and the 50% first-year allowance are claimed on the Company Tax Return, and a limited company must include a separate capital allowances calculation. A claim for full expensing must be made in the accounting period the item was bought.
To check whether full expensing or the 50% first-year allowance can be claimed, the guidance asks for the accounting period of the business and information about the plant or machinery, including the cost of the asset (including delivery and installation charges) and how it was obtained, for example whether it was purchased outright or on hire purchase.
If a company later sells or disposes of an asset it has claimed these allowances for, it must work out the correct charge to add when working out its taxable profits.
Sources
Rates, thresholds and dates in this guide come from these sources. Check the source for the current figure.