Full expensing
Full expensing lets a company deduct 100% of the cost of qualifying new plant and machinery from taxable profit in the year of purchase, with no annual cap. Special rate assets get a 50% first-year allowance instead.
Also known as: 100% first-year allowance
How it works
Full expensing is a permanent 100% first-year allowance for companies buying new and unused main rate plant and machinery. Unlike the Annual Investment Allowance it has no limit, which makes it the relief that matters for larger capital programmes. Special rate expenditure, such as integral features and long-life assets, gets a 50% first-year allowance with the balance going into the special rate pool.
Only companies within the charge to corporation tax can claim, and only on assets that are new. Second-hand equipment, cars, and assets bought for leasing out are excluded — those routes go through the Annual Investment Allowance or the pools instead. For most small companies buying under £1,000,000 of equipment, the Annual Investment Allowance is simpler and covers second-hand assets too.
There is a sting on disposal. When you sell an asset on which full expensing was claimed, an immediate balancing charge equal to the sale proceeds is added to taxable profit, rather than the usual pool adjustment. For the 50% allowance, half the proceeds are charged immediately.
Because the claim is made in the corporation tax computation, the paperwork that supports it — invoices, asset register, the date the obligation arose — needs to be in place before the return is filed, not reconstructed in an enquiry.
Who this affects
- Companies spending more than £1,000,000 on new equipment in a year
- Manufacturing and logistics businesses investing in new plant
- Companies fitting out commercial premises with integral features at the 50% rate
- Any director expecting relief on a second-hand purchase, which does not qualify
Common mistakes
- Claiming on second-hand assets, which are excluded
- Forgetting the immediate balancing charge when the asset is later sold
- Claiming on a car, which never qualifies for full expensing
- Using full expensing when the Annual Investment Allowance would have been simpler and equally effective
Frequently asked questions
What is full expensing?
A 100% first-year corporation tax deduction on qualifying new and unused main rate plant and machinery, with no annual limit.
How is it different from the Annual Investment Allowance?
The Annual Investment Allowance is capped at £1,000,000 but covers second-hand assets and is open to unincorporated businesses. Full expensing is uncapped but companies only, new assets only.
What happens when I sell the asset?
A balancing charge equal to the disposal proceeds is added straight to taxable profit, or half the proceeds for assets that had the 50% special rate allowance.
Can sole traders claim it?
No. Full expensing applies only to companies within the charge to corporation tax. Unincorporated businesses use the Annual Investment Allowance.
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Reviewed by Waqas Sagar ACA FCCA FMAAT · Last reviewed 13 September 2026 · Figures for 2026/27 · About our practice
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