Corporation tax
The annual investment allowance gives 100% relief on up to £1m of qualifying plant and machinery. What qualifies, what does not, and how groups share the limit.
Written and reviewed by Waqas Sagar Member of ICAEW, Fellow of ACCA, Fellow of AAT, a double graduate and entrepreneur at heart, helping startups grow and serving thousands of businesses nationwide with an excellent team. Published by LimitedCompany.Accountants, 12 London Road, Morden, London SM4 5BQ. Reviewed 12 September 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
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QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityThe annual investment allowance gives 100% corporation tax relief on qualifying plant and machinery spending up to £1m in a twelve month period, so the full cost is deducted from profit in the year of purchase rather than written down over time.
What qualifies
Timing the claim
The annual investment allowance gives 100% corporation tax relief on qualifying plant and machinery spending up to £1m in a twelve month period, so the full cost is deducted from profit in the year of purchase rather than written down over time.
Computers, tools, machinery, commercial vehicles, office furniture, integral features in commercial property such as heating and electrical systems, and most second-hand equipment. Cars are excluded, which is the exception that catches people out.
The limit is pro-rated for short accounting periods and shared between associated companies under common control, so a group has one £1m allowance to allocate rather than one each.
Relief is given in the period the expenditure is incurred, usually when the obligation to pay becomes unconditional, not when the invoice is paid. Buying just before a year end pulls relief forward a full year; buying a week later defers it.
If profit sits in the 26.5% marginal band, each £1,000 of qualifying spend saves £265. If profit is under £50,000, the same spend saves £190. Where the purchase is flexible, the band should influence the timing.
Rates, thresholds and deadlines quoted here reflect the 2026/27 UK position and current Companies House and HMRC guidance. Check GOV.UK, or ask us, before relying on them for your own company.
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Frequently asked
The excess goes into the main or special rate pools, or may qualify for full expensing on new plant and machinery.
Yes, on the capital element, once the asset is brought into use.
A balancing charge arises, effectively clawing back relief on the sale proceeds.
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No. This page explains general UK rules and common accounting treatment. Your facts, contracts and wider tax position must be reviewed before you rely on a conclusion.
Included approach
Check the current rules
Deadlines, thresholds and filing rules change. GOV.UK and Companies House publish the current statutory position; advice should then be applied to your company’s circumstances.
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