When you buy equipment for a business you usually cannot deduct the cost like a normal expense. You claim capital allowances instead, and which allowance you get changes the timing enormously — sometimes all of it this year, sometimes a fraction a year for a decade.
Full expensing: companies, new assets
Full expensing gives a 100% first-year allowance on new main-rate plant and machinery, and 50% on new special-rate assets. It is uncapped and permanent. The two conditions people miss: it is for <strong>companies only</strong>, and the asset must be <strong>new and unused</strong>.
The Annual Investment Allowance still matters
The AIA gives 100% relief on up to £1,000,000 a year, covers both pools, and — unlike full expensing — is available to sole traders and partnerships and to second-hand assets. For most small businesses it does everything full expensing would have done.
If you are unincorporated, or buying used equipment, full expensing is not available to you and the AIA is the route. That single distinction is the one most commentary blurs.
Where the money gets stuck
Special rate assets. A fit-out's lighting, wiring, heating and air conditioning are integral features, and once the AIA is used up they attract 6% a year — which takes decades to relieve. Pointing the AIA at special-rate spend first, and leaving main-pool spend to full expensing, is usually the better order.
The main pool writing down allowance also fell from 18% to 14% in April 2026, which makes getting the up-front allowances right worth more than it used to be, not less.
Common questions
Can I claim on a car?
Not through the Annual Investment Allowance or full expensing — cars are excluded from both and run on their own rules based on CO2 emissions. New and unused cars at zero emissions attract a 100% first-year allowance; second-hand electric cars and anything up to 50g/km go into the main pool at 14%; above 50g/km it is the special rate pool at 6%. Vans and lorries are not cars for this purpose and are treated as ordinary plant.
What happens when I sell the asset?
If you claimed full expensing you face an immediate balancing charge on disposal — 100% of the disposal value for main-rate assets, 50% for special rate — added straight back to your taxable profits. That is a real cashflow consideration for anything you expect to sell or trade in within a few years, and it is easy to forget about when the relief was claimed several years earlier.
Is it better to buy before or after my year end?
Buying before your year end brings the relief a full year forward, which is usually worth doing if the purchase was going to happen anyway. What is not worth doing is buying something you do not need in order to save tax — you spend a pound to save twenty-five pence. The allowance is a discount on a decision, not a reason for one.