Autumn Budget 2025
These measures appear as a mixture of good and bad news, although it should at least encourage investment in plant and machinery, throughout the UK.
The bad…
For businesses who currently have a pool of unused capital allowances, they may use this to decrease taxable profits by 18% on a reducing balance basis each year. From April 2026, this rate will reduce by 4% to 14%. Therefore, companies with unused pools of expenditure will experience an increase in taxation of effectively 1%, and for highly profitable unincorporated businesses, this figure will be closer to 2%. This is, however, a timing issue, as full tax relief will be available over the life of the asset.
The special rate pool, (currently a 6% writing down allowance) which includes integral features, will not be affected.
The good…
Businesses already have an attractive regime for investment in new plant and machinery because there is a £1 million per annum allowance for writing off qualifying capital purchases, as well as a full expensing regime for companies which allows a 100% write-off against profits in the year of purchase, if expenditure exceeds £1 million.
A new 40% first year allowance will be introduced from 1 January 2026 which will not only be available to companies, but unincorporated businesses as well, from small sole traders to large partnerships. This allowance may also be applied to assets used for leasing but does not include the acquisition of second hand assets and cars.
It is not possible for a partnership which includes a non-natural person (typically a company partner) to claim the £1 million annual investment allowance, but this measure should at least allow a 40% write off in the first year of the purchase.
The ugly…
According to the Budget impact statement, these measures net an increase in revenue to the Treasury of over £1 billion per year after introduction, which must indicate an overall increase in taxation for business.
