The new financial year will see many of the proposed changes announced in the Autumn Budget enacted, impacting businesses across the country.
These changes will have business owners planning their tax strategy for the 2025/26 tax year, and a key part of this should be considering capital allowances.
New rules, new pressures
From April 6, 2025, employer National Insurance Contributions (NICs) are rising from 13.8 per cent to 15 per cent.
At the same time, the secondary threshold (the point at which employers start paying NICs) will fall from £9,100 to £5,000, while the Employment Allowance will increase from £5,000 to £10,000.
These changes, along with increases to the National Living Wage (NLW) and National Minimum Wage (NMW), will also increase from the same date, adding further pressure to your budget.
Capital allowances available to businesses
While the changes made in the Autumn Budget could cause you financial problems, capital allowances provide a efficient way to reduce taxable profits.
Here are just a few of the capital allowances you can take advantage of in the 2025/26 tax year:
- Full expensing
- Available to companies investing in new, qualifying plant and machinery.
- Allows 100 per cent of the cost to be deducted in the year of purchase.
- Applies to main rate assets only (machinery, equipment), not to long-life or special rate assets.
- Annual Investment Allowance (AIA)
- Offers 100 per cent relief on qualifying capital expenditure.
- Available to companies, sole traders, and partnerships.
- The limit is £1 million per year.
- First-Year Allowances (FYA)
- Allows 100 per cent relief on certain environmentally beneficial or energy-efficient equipment.
- Does not reduce the available AIA.
- Must be claimed in the year of purchase.
- Qualifying assets include electric cars with zero CO₂ emissions and equipment for electric vehicle charging points.
- Writing Down Allowances (WDA)
- Used when assets do not qualify for AIA or full expensing.
- Main rate pool – 18 per cent per year on a reducing balance basis.
- Special rate pool – Six per cent per year (integral features, long-life assets).
In short, capital allowances can give your business a real financial boost, but only if the claims are done right.
It is easy to overlook what qualifies or make mistakes that invite HMRC attention, so a bit of expert help now can save a lot of hassle later.
Speak to us today and make capital allowances work for your business in 2025/26.
