The headlines
From 2026:
- A new 40% first-year allowance (FYA) for main rate plant and machinery.
- The standard writing-down allowance falls from 18% to 14%.
This changes the pattern of relief on equipment, machinery and some fit-out costs.
What this means for your investment decisions
The Government wants you to invest, but also to smooth tax relief over time.
- You’ll get more relief up front (40%) than under pure writing-down allowances.
- But the remaining value is written down more slowly (14% instead of 18%).
For many small businesses, the Annual Investment Allowance (AIA) will still give 100% relief up to its current limit, but not all spending qualifies or fits neatly into that.
When timing really matters
- If you’re planning a big refit or machinery purchase, the year you incur the cost will affect how quickly the tax relief feeds into your cashflow.
- For companies near key profit thresholds, the pattern of allowances can push you above or below certain tax bands or affect dividend decisions.
Action steps
- Map out major capital spending for the next 3–5 years
Don’t make one-off decisions in isolation. - Ask for a capital allowances forecast
For each major project, have your accountant show the tax relief profile over several years. - Use AIA where it gives a better result
For many SMEs, AIA will remain the main tool, but you need to know when 100% AIA vs 40% FYA + WDAs is best. - Coordinate tax planning with financing
If you’re borrowing for equipment, match loan repayments with the pattern of tax relief to avoid cashflow surprises.
How can we help at MDH
Book a quick tax chat with me, no strings attached. We’ll have a look at your situation and spot opportunities you might be missing. And as a thank-you, I’ll send you a free copy of our book 75 Ways to Pay Less Tax, packed with simple, practical tips you can put to work straight away. Let’s make sure your money’s working smarter, not harder.
