Budget 2023: Capital Allowances

The Chancellor announced the following measures on Capital Allowances in his Spring 2023 Budget. 

It is proposed from April 2023: 

• Companies incurring qualifying expenditure on new plant and machinery before 1 April 2026 will be able to claim either a 100% or 50% First Year Allowance (FYA). The 100% allowance is known as 'full expensing'. This will not apply to sole traders or partnerships.
• The temporary £1m Annual Investment Allowance (AIA) limit is made permanent. 
• 100% FYAs on electric vehicle charge-points are extended to 31 March 2025 for Corporation Tax purposes and 5 April 2025 for Income Tax purposes. 

Full expensing

From 1 April 2023:

• Spring Finance Bill 2023 will introduce full expensing for three years.
• Companies incurring qualifying expenditure on new plant and machinery on or after 1 April 2023 and before 1 April 2026 will be able to claim:
  • 100% First Year Allowances (FYAs) for main rate expenditure (‘full expensing’).
  • 50% FYAs for special rate expenditure, including long-life assets.
• The allowances will not apply to second-hand assets and the general exclusions in s.46 CAA 2001 will apply, meaning allowances will not be available on cars or most plant and machinery acquired for leasing.  
• Disposals of plant or machinery where full expensing or a 50% FYA have been claimed will be subject to immediate balancing charges. These will be:
  • 100% of the disposal value in the case of full expensing.
  • 50% of the disposal value in the case of the 50% FYA.
• Balancing charges will be reduced proportionately if an allowance is claimed in respect of only part of the expenditure.
• An anti-avoidance provision will apply to counteract arrangements which are contrived, abnormal or lacking a genuine commercial purpose.

Annual Investment Allowance (AIA)

From 1 April 2023 (as announced at the mini-budget in September 2022):

• Spring Finance Bill 2023 will include measures to make permanent the temporary £1m AIA limit.
• Existing transitional rules applying to chargeable periods straddling 1 April 2023 will be repealed.

First-Year Allowance (FYA): electric vehicle charge points

From 1/6 April 2023 (as announced at Autumn Statement 2022):

• Spring Finance Bill 2023 will include measures to extend the 100% FYA for electric vehicle charge-points by two years to 31 March 2025 for Corporation Tax purposes and 5 April 2025 for Income Tax purposes.

Useful links

Spring Budget 2023: at a glance
Freeview summary of the measures announced in the Budget 2023

External links

Policy paper: Capital allowances: full expensing

Policy paper: First-year allowance extension for electric vehicle charge-points

Policy paper: Legislating the Annual Investment Allowance at £1m