Answers · UK 2025/26
What replaced the capital allowances super-deduction in the UK?
The 130% super-deduction ended on 31 March 2023. It was replaced by Full Expensing -- a permanent 100% first-year allowance for companies on qualifying new plant and machinery in the main pool (no cap) -- from 1 April 2023. A 50% first-year allowance applies to special rate pool assets. The Annual Investment Allowance (£1m) remains available to all business types.
Full answer
The super-deduction was introduced in Finance Act 2021 as a temporary measure to boost business investment after the COVID-19 pandemic. It gave companies a 130% first-year deduction on qualifying main pool plant and machinery (meaning a £100,000 investment could generate a £130,000 deduction against profits). It ran from 1 April 2021 to 31 March 2023 and was then replaced by Full Expensing. **Why was it 130%?** At the 19% CT rate, 130% relief gave a tax saving of 24.7p per pound invested -- more than the standard 18% WDA would generate even over many years. It was designed to bring forward investment decisions. **What replaced it from 1 April 2023 -- Full Expensing:** - **100% first-year allowance** for companies on new, unused main pool plant and machinery (computers, equipment, machinery, commercial vehicles) - **50% first-year allowance** on new, unused special rate pool assets (integral features such as heating, cooling, lifts; long-life assets) - **No monetary cap** on Full Expensing (unlike the £1m AIA limit) - **Companies only** -- Full Expensing is not available to sole traders or unincorporated partnerships - **Permanent from April 2024** (initially announced as a temporary 3-year measure, then made permanent) **Balancing charge on disposal:** When an asset on which Full Expensing has been claimed is sold, a balancing charge arises equal to the disposal proceeds (up to the original cost) -- the deferred CT becomes payable. **Why the change was made:** The super-deduction ended when CT rose from 19% to 25% in April 2023. A 130% deduction at 25% would give 32.5p relief per pound -- considered too generous. Full Expensing at 100% gives 25p per pound at the 25% main rate, restoring neutrality. **AIA vs Full Expensing:** The Annual Investment Allowance (£1m) is available to all businesses and covers the same assets as Full Expensing for most SMEs. Full Expensing is mainly relevant for large companies with capital expenditure above £1m per year, since it has no cap.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.