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Craig Simper, PPS Group Financial Controller, explains below what is replacing the super-deduction capital allowance, and how you can benefit from it.
The super-deduction capital allowance launched in April 2021 has now come to an end, but the corporation tax relief hasn’t.
Businesses can make a tax saving of 25p for every £1 invested on main rate assets with the introduction of the Full Expensing (FE) capital allowance.
Announced in the 2023 Spring Budget, taxpayers can use FE to deduct the cost of certain plant and machinery from their profits before tax straight away, rather than slowly over the life of the asset.
FE is effective from 1st April 2023 until 31st March 2026, however the long-term ambition of the UK Government is to make FE permanent.
Businesses can achieve the same savings with FE as they could with the super-deduction capital allowance, due to the increase in corporation tax from 19% to 25% from 1st April 2023.
An example:
Before the super-deduction and with the 19% Corporation Tax rate, companies investing £10m in main rate assets received a £342,000 tax saving in year 1. Under full expensing, on a £10m investment, a company will receive a £2.5million tax saving in year 1.
The UK Government are hoping this initiative will build on what was started by the super-deduction capital allowance and improve UK productivity.
Our team can help to signpost you to capital allowances and other schemes that can benefit your business, but we also help to ensure that your investment is the right one to take your company forward.
You can find the government guidance on FE here:
Please note: this article doesn’t provide investment, financial or tax advice. It is an illustrative example. Please speak to your own company tax advisor.
