Key facts
- Full expensing gives a 100% first-year allowance on qualifying new main-rate plant and machinery.
- A 50% first-year allowance applies to new special-rate assets (integral features, long-life assets).
- Made permanent from April 2023 — originally introduced as a temporary measure in the Spring Budget 2023.
- Available to companies only — sole traders and partnerships cannot claim full expensing.
- Assets must be new and unused — second-hand assets do not qualify.
How Full Expensing Gives 100% First-Year Relief
Full expensing is a 100% first-year allowance (FYA) that lets companies deduct the entire cost of qualifying new plant and machinery from taxable profits in the year of purchase. Unlike the AIA, there is no annual monetary limit — a company can claim full expensing on any amount of qualifying expenditure.[1]
Introduced in the Spring Budget 2023 (initially for expenditure from 1 April 2023 to 31 March 2026), it was made permanent in the Autumn Statement 2023. It is now a core part of the UK’s capital allowances regime.
Qualifying Conditions
To claim full expensing, all of the following must apply:[1]
- The claimant must be a company within the charge to Corporation Tax
- The expenditure must be on new, unused plant and machinery (not second-hand)
- The asset must not be a car
- The asset must not have been previously used (by anyone)
- The asset must not be for leasing (certain exclusions apply to assets leased to non-corporates)
- The expenditure must be incurred on or after 1 April 2023
Not for unincorporated businesses: Sole traders and partnerships cannot claim full expensing. They should use the Annual Investment Allowance instead, which gives the same 100% relief but with a £1 million annual cap.[3]
Full Expensing Rates
The rate depends on whether the asset would normally fall into the main rate or special rate pool:[2]
| Asset Type | FYA Rate | Examples |
|---|---|---|
| Main rate assets | 100% | Most plant & machinery: computers, furniture, tools, commercial vehicles, manufacturing equipment |
| Special rate assets | 50% | Integral features (electrical systems, lifts, heating), long-life assets (25+ year life), thermal insulation |
For the 50% FYA on special rate assets, the remaining 50% enters the special rate pool and qualifies for 6% writing down allowances in subsequent years. Claims are entered in the capital allowances section of the CT600 — HMRC-recognised filing software handles the split between the 100% and 50% rates.
Disposal & Balancing Charges
When a company sells or disposes of an asset on which full expensing was claimed, a balancing charge arises. The disposal value (typically the sale proceeds, capped at original cost) is brought into the tax computation as taxable income.[1]
| Original Allowance | Disposal Treatment |
|---|---|
| 100% full expensing claimed | Disposal proceeds (capped at cost) are a balancing charge — added to taxable profits |
| 50% FYA on special rate asset | Disposal proceeds reduce the special rate pool balance; a balancing charge only arises if the pool goes negative |
Tip: The balancing charge is capped at the original cost of the asset, not the sale proceeds if they are higher. If you sell for more than cost, the excess is a chargeable gain, not a balancing charge.
Full Expensing vs AIA: Which Should You Use?
For many companies, full expensing and AIA achieve the same result (100% immediate relief). The choice depends on your circumstances:
| Situation | Best Option |
|---|---|
| Buying new plant & machinery within £1m | Either — both give 100% relief |
| Buying new plant & machinery exceeding £1m | Full expensing — no monetary cap |
| Buying second-hand assets | AIA — full expensing requires new assets |
| Sole trader or partnership | AIA — full expensing is companies only |
| New special rate assets | 50% FYA (part of full expensing) is better than 6% WDA on the full cost |
Frequently Asked Questions
What is full expensing for Corporation Tax?
Full expensing is a permanent 100% first-year allowance that lets companies deduct the entire cost of qualifying new plant and machinery from taxable profits in the year of purchase, with no annual monetary limit.
Can sole traders claim full expensing?
No. Full expensing is available to companies only. Sole traders and partnerships should use the Annual Investment Allowance instead, which gives 100% relief up to £1 million per year on both new and second-hand assets.
Does full expensing apply to second-hand assets?
No. Full expensing only applies to new, unused plant and machinery. For second-hand assets, companies should claim the Annual Investment Allowance (up to £1 million) or writing down allowances.
What happens when I sell a full-expensed asset?
The disposal proceeds (capped at the original cost) are treated as a balancing charge and added back to taxable profits. Any proceeds exceeding the original cost are taxed as a chargeable gain.
Can I claim full expensing on a car?
No. Cars are excluded from full expensing. Zero-emission cars qualify for a separate 100% first-year allowance, while other cars go into the main rate or special rate pool for writing down allowances.
Further Reading
- Annual Investment Allowance (AIA) — the £1 million alternative for new and used assets
- Writing Down Allowances — for the balance not covered by AIA or full expensing
- Capital Allowances Overview — all types of allowance at a glance
- Balancing Charges & Disposals — what happens when full-expensed assets are sold
- Taxable Profits Explained — how capital allowances reduce taxable profit
Looking for simple Corporation Tax software?
#GoFile is HMRC-recognised and trusted by 50,000+ UK businesses. Set up in minutes, file with confidence.
Get Started For FreeNo credit card required · Cancel anytime