Full expensing lets a company deduct 100% of the cost of qualifying new and unused plant and machinery from its profits before Corporation Tax in the year of purchase. Special rate assets attract a 50% first year allowance instead. The relief is now permanent, it is uncapped, and it is open only to companies within the charge to Corporation Tax. Cars, second hand assets and items bought for leasing are generally excluded, and selling an asset later can trigger a balancing charge.

Full expensing is one of the most generous capital allowances in the UK tax system. For qualifying spending on or after 1 April 2023, a company can write off the whole cost of most new plant and machinery straight away, rather than spreading tax relief over many years through writing down allowances. It sits alongside the Annual Investment Allowance and is designed to reward investment by incorporated businesses. This guide explains how it works, what qualifies, where the limits sit, and what happens when you sell an asset.

What is full expensing?

Full expensing gives a 100% first year allowance on qualifying new and unused main rate plant and machinery. In practice this means a company spending £100,000 on eligible equipment can deduct the full £100,000 from its taxable profits in the year the money is spent, cutting its Corporation Tax bill for that period.

There is a companion measure for special rate assets. These attract a 50% first year allowance, so half of the cost is deducted immediately and the remaining balance goes into the special rate pool, where it is written down at 6% a year in later periods. Special rate assets include integral features of a building, such as electrical and cold water systems, and long life items.

Is full expensing permanent?

Yes. Full expensing was introduced at the Spring Budget 2023 with a planned end date of 1 April 2026, but at the Autumn Statement 2023 the Government removed that sunset date and made the relief permanent. Companies can therefore treat it as a lasting feature of the tax system when planning capital investment for the 2025/26 and 2026/27 tax years and beyond.

Who can claim full expensing?

Only companies within the charge to Corporation Tax can claim full expensing or the 50% first year allowance. Sole traders and partnerships cannot use it. If you are weighing up your business structure, our guide to sole trader versus limited company looks at how the tax treatment differs, and Corporation Tax explained covers how company profits are taxed.

Unincorporated businesses are not shut out of generous relief altogether. They can still use the Annual Investment Allowance, which serves a similar purpose for many smaller purchases.

How is full expensing different from the Annual Investment Allowance?

The two reliefs overlap, but they are not the same, and the differences matter when you plan a large purchase.

  • Who can claim. Full expensing is for companies only. The Annual Investment Allowance is open to companies, sole traders and partnerships alike.
  • The cap. Full expensing is uncapped, so there is no limit on qualifying main rate spending. The Annual Investment Allowance is capped at £1 million a year.
  • The condition of the asset. Full expensing applies only to new and unused assets. The Annual Investment Allowance can be claimed on second hand assets too.

Many companies use both. A common approach is to claim the Annual Investment Allowance on second hand purchases, then use full expensing for new main rate items once the £1 million allowance is used up or where the asset does not qualify for it.

What assets qualify?

To qualify for full expensing, the plant or machinery must be new and unused, bought by a company subject to Corporation Tax, and acquired on or after 1 April 2023. Typical qualifying items include machines, tools, computers and servers, office furniture, vans and lorries, and warehouse equipment such as forklifts.

Several categories are generally excluded:

  • Cars of any kind.
  • Second hand or used assets.
  • Assets bought to lease or hire out to someone else, with a narrow exception for background plant and machinery within a building.
  • Gifts, and assets bought in the accounting period in which the trade ceases.

What happens when you sell the asset?

Because you claimed such a large deduction up front, selling or otherwise disposing of the asset can create a balancing charge, which increases your taxable profits in the year of disposal.

For an asset on which you claimed full expensing, the company brings in an immediate balancing charge equal to 100% of the disposal value. So if you sell a machine for £8,000, that £8,000 is added straight back to your taxable profits. For a special rate asset on which you claimed the 50% first year allowance, the balancing charge is 50% of the disposal value, and the other half is deducted from the special rate pool in the normal way. Keeping clear records of which allowance you claimed on each asset is essential to get the disposal figures right.

Getting the claim right

Full expensing can transform the tax position on a big investment, but the rules on what qualifies, how much to claim and how to handle disposals are detailed, and mistakes can invite an HMRC enquiry. Reading our wider capital allowances guide alongside this page will help you see where full expensing fits.

If HMRC does open an enquiry into your allowances, professional fees can mount quickly. Solar Protect tax investigation insurance covers up to £100,000 of your accountant’s fees with no excess, then Get a quote.

Reviewed by Matthew Bartlett, Director, Solar Protect. This guide is general information, not personalised tax or financial advice. Figures are correct for the 2025/26 and 2026/27 UK tax years at the time of writing.