The main rate of First Year Allowance (FYA) will increase from 40% to 50% for qualifying expenditure incurred on or after 1 January 2027. This means that businesses can deduct half the cost of eligible assets from their taxable profits in the year of purchase, providing greater upfront tax relief.

This is accompanied by a reduction in the main rate of Writing Down Allowance (WDA) from 14% to 12%. This lower rate will apply from 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax. The special rate WDA remains unchanged at 6%.

Currently, new and unused fully-electric cars attract a special 100% FYA. This separate relief is due to expire on 31 March 2027 for companies and 5 April 2027 for unincorporated businesses. This was not extended in the Budget, so if you are considering purchasing a new electric car through your business it might be sensible to incur the expenditure before the expiry date.

After the relief expires, qualifying zero-emission cars will generally enter the main rate pool and receive WDAs at the applicable rate, rather than going into the special rate pool.

Businesses should review the timing of planned expenditure to understand the impact on capital allowances. We can help you with this.