Capital allowances can be claimed when purchasing tangible capital assets to use within a business, enabling the cost to be written off against taxable income.

Following the 2021 Budget, businesses are now able to benefit from some significant measures that will allow them to lower their corporation tax bills while helping to stimulate business investment.

The new capital allowances

The Super-Deduction

The 130% super-deduction enables companies to claim 130% first-year relief for most new plant and machinery investments that normally qualify for 18% main rate writing down allowances.

50% First-Year Allowance (FYA)

This new capital allowance for investments in integral features offers a 50% FYA for expenditure on new assets that would normally qualify for 6% special rate writing down allowances.

These temporary measures apply to qualifying expenditure incurred from 1 April 2021 up to and including 31 March 2023.

Timing of future expenditure

With these new measures due to end on 31 March 2023, and corporation tax rates increasing to 25% on 1 April 2023 for companies with profits in excess of £50,000 (or even lower where there are associated companies), careful consideration should be given to the timing of future expenditure to ensure capital allowances are claimed in a tax efficient manner whilst not adversely impacting on future cashflows and corporation tax liabilities.

For further details on capital allowances, including examples of qualifying assets and an example of the new capital allowance in practice, please download our factsheet below.