Last updated: 16 October 2026
How does full expensing work for plant and machinery?
Full expensing lets a company deduct 100% of the cost of new, unused main pool plant and machinery from its taxable profits in the year it buys it. New special rate assets, such as integral features and long-life assets, get a 50% first-year allowance, with the balance going into the special rate pool at 6% a year. Full expensing is permanent for companies. Sole traders and partnerships can’t use it, but they can use the £1 million Annual Investment Allowance (AIA), which also gives 100% relief on most plant and machinery, new or used.
Which allowance applies?
| Allowance | Who | Assets | Rate |
| Full expensing | Companies | New main pool plant | 100% |
| 50% FYA | Companies | New special rate assets | 50% |
| AIA | All businesses | New and used plant, up to £1m a year | 100% |
| Writing down allowance | All | Main pool balance | 14% (18% before April 2026) |
| Writing down allowance | All | Special rate pool | 6% |
| 40% FYA (from January 2026) | Companies and unincorporated | New main pool plant, including for leasing | 40% |
What happens to the remaining pool balance?
Assets already in your main pool before you claim full expensing stay there and continue to get writing down allowance at 14% a year (18% before April 2026, with a hybrid rate for periods spanning the change). If the pool balance falls to £1,000 or less, you can claim the whole small pool balance. Full expensing assets sit outside the pool.
Selling full expensing assets
When you sell an asset on which you claimed full expensing, the sale proceeds are a balancing charge, added to your profits in the year of sale. For 50% FYA assets, half the proceeds are a charge and half reduce the pool.
Excluded assets
- Cars
- Second-hand or used assets
- Assets bought for leasing (except under the new 40% FYA)
- Assets bought in the year a trade ends
Example
A manufacturing company spends £300,000 on a new machine and £40,000 on new electrical systems in its factory in 2026/27. It claims full expensing on the £300,000 machine and 50% FYA of £20,000 on the electrics, with the remaining £20,000 going into the special rate pool. At 25% corporation tax, the first-year saving is £80,000.
Choosing between AIA and full expensing
Companies can choose either for new main pool assets. AIA can be used on used assets and special rate assets at 100%, so companies spending less than £1m often claim AIA on special rate items and full expensing on main pool items.
Common mistakes
- Claiming full expensing on second-hand equipment
- Forgetting balancing charges on disposals
- Claiming on cars
- Not using AIA on special rate assets
Records to keep
Keep invoices, delivery dates and an asset register showing allowances claimed.
The new 40% first-year allowance
Since 1 January 2026, a 40% first-year allowance has been available for new, unused main rate plant and machinery (not cars), including assets bought for leasing. It is open to sole traders and partnerships as well as companies, and is useful once the £1m AIA has been used.
Frequently asked questions
Can a sole trader claim full expensing?
No, use the AIA.
Does full expensing apply to software?
Only if it qualifies as plant.
What about hire purchase?
Yes, once the asset is brought into use.
Can I claim on vans?
Yes, new vans qualify.
Related: AIA for sole traders, the super-deduction and qualifying fixtures.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with capital allowances advice. See our limited company accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
