Plant & Machinery Tax Relief Changes from 2027

Plant and machinery tax relief is changing from 2027

Businesses investing in plant and machinery will see changes to the way tax relief is given from 2027, following measures announced in the Autumn Budget 2026.

The Government has announced that the main rate first-year allowance will increase to 50% for qualifying expenditure incurred from 1 January 2027. At the same time, the main rate writing-down allowance will reduce from 14% to 12% from April 2027.

What does the 50% first-year allowance mean?

The increased 50% first-year allowance will enable businesses to deduct half of qualifying expenditure on eligible plant and machinery when calculating taxable profits for the year in which the expenditure is incurred.

In practical terms, this provides faster tax relief when a business invests in qualifying equipment.

It could be particularly relevant where other capital allowances, such as the Annual Investment Allowance (AIA) or full expensing, are unavailable or have not been used. Eligibility conditions and exclusions apply, so the appropriate relief will depend on the business and the investment being made.

Writing-down allowance reducing to 12%

There is a less generous change for businesses with expenditure in their main rate pool.

The main rate writing-down allowance will reduce from 14% to 12%, meaning tax relief on remaining expenditure in the pool will be spread over a longer period.

The new rate will apply from:

• 1 April 2027 for Corporation Tax
• 6 April 2027 for Income Tax

The main rate pool generally includes qualifying plant and machinery that does not qualify for immediate relief or another capital allowance. Certain expenditure, including some integral features and longer-life assets, is instead allocated to the special rate pool.

No change has been announced to the special rate writing-down allowance, which is set to remain at 6%.

Planning an investment in plant and machinery?

The combination of a more generous first-year allowance and a lower ongoing writing-down allowance makes the timing and structure of capital investment worth considering carefully.

If you're planning significant spending on equipment or other business assets, getting advice before committing to the investment can help you understand which capital allowances may be available and when you could receive the tax benefit.

Charlton Baker's Business and Tax Advisory service is designed to help businesses make better decisions, plan for the future and manage tax effectively. Call our experts now on 01380 723692 or email here.