How UK Business Tax Relief Can Supercharge Your Business Investment in 2026
If you’re running a UK business, the way investment spending is treated for taxes can make a huge difference to your cashflow and growth plans. The government’s capital allowances regime – especially full expensing and the Annual Investment Allowance (AIA) – is designed to reward businesses that invest in essential equipment, machinery and plant.
What Exactly Is Full Expensing?
Full expensing allows companies to claim 100% tax relief on the cost of qualifying plant and machinery in the year they invest. That means instead of writing the cost off over several years through depreciation, you can deduct the full amount from your taxable profits immediately.
Who benefits?
-
Limited companies paying corporation tax
-
Businesses buying new and unused assets for use in their trade
This relief applies to most tangible assets used in the business – from production equipment to commercial vehicles – as long as they are not cars or excluded categories.
Example:
If your company spends £100,000 on qualifying equipment, you can deduct £100,000 from your profits this year – effectively cutting your corporation tax bill by up to £25,000 (at the current 25% corporation tax rate). That’s powerful cashflow support.
What About the Annual Investment Allowance (AIA)?
The Annual Investment Allowance (AIA) remains at £1 million per year for all qualifying businesses – not just limited companies. This means:
-
Sole traders
-
Partnerships
-
Limited companies
can all benefit from 100% first-year relief on plant and machinery up to £1m each accounting period.
AIA and full expensing work together:
-
If you’re a company, full expensing gives you unlimited first-year relief on new plant and machinery.
-
If you are not a company (or for certain items outside full expensing), AIA gives first-year relief up to £1m.
This can help make investment decisions simpler, faster and more tax-efficient than ever before.
What Qualifies?
Most tangible business assets count as plant and machinery for these allowances, including:
-
Commercial vehicles and plant (vans, trucks, tractors)
-
Manufacturing and production equipment
-
HVAC, IT and telecoms equipment
-
Office machinery and tools
-
Specialist equipment used directly in the business
However, some items like cars and assets for leasing to others have different rules and may not qualify for full expensing – so it’s always worth checking with your tax adviser or broker.
Why This Matters to Your Business
These reliefs change the economics of investment in a big way:
Improved cashflow – You reduce your tax bill in the year of investment instead of waiting years.
Stronger growth runway – Immediate relief makes it easier to plan and fund expansion projects.
More competitive stance – You can upgrade technology and equipment faster and with less tax friction.
Simplified planning – Knowing reliefs are permanent removes uncertainty from budgeting.
Many businesses delay spending because of concerns about cashflow or tax timing. With full expensing and AIA in place, that barrier is much lower – meaning investment becomes a tool for growth, not a budget risk.
How to Make the Most of It
-
Identify qualifying assets – List machinery, vehicles, tech and tools your business needs.
-
Time the investment – Plan purchases within your accounting period to maximise relief.
-
Coordinate with finance – Work with your accountant to ensure claims are correctly made.
-
Align with strategy – Look at investments that deliver operational improvements and tax benefit.
Final Thought
Tax incentives shouldn’t just be an afterthought – they can be a strategic advantage. Whether you’re refreshing your equipment, expanding capacity, or upgrading technology, full expensing and the AIA help keep more money in your business when you need it most.
If you’d like help evaluating how these reliefs could work for your business or how asset finance can support your investment plans, get in touch. This is one area where smarter planning equals stronger growth.
Our goal is to provide straightforward, responsive funding solutions that align with your business’s specific circumstances. Our team is here to support your business with a wide range of flexible funding options tailored to your needs.
Contact Us On 01634 386869
More information on this Full Expensing from Spring and Autumn 2023 Budgets can be found on the Government website.
This blog is provided for general information purposes only and does not constitute financial, tax or legal advice. Full expensing, capital allowances and any associated tax reliefs depend on individual business circumstances and may be subject to change by HMRC. Readers should not rely solely on the information in this article when making investment or financing decisions.
First Business Finance does not provide tax advice. Businesses should consult a qualified accountant or tax professional to confirm eligibility for any reliefs and to understand how these may apply to their specific situation. All finance facilities are subject to status, credit approval and terms and conditions. Failure to keep up with repayments may result in additional charges and could affect your credit rating. First Business Finance is authorised and regulated by the Financial Conduct Authority (FRN: 685879).