Spring Forecast 2026 – Capital Allowances Summary
• No changes announced
• Annual Investment Allowance remains £1 million
• Full Expensing continues
• No new restrictions introduced
• Existing capital allowance rules remain in place
What Did the Spring Forecast 2026 Announce for Capital Allowances?
There were no changes made to capital allowances in the latest Spring Forecast announcement. It appears the decision to maintain existing tax relief schemes looks to reflect the government’s suggested plan to provide businesses with certainty. Currently, businesses can benefit from several key capital allowance schemes that form the backbone of the UK’s tax incentive framework for business investment.
Annual Investment Allowance (AIA) provides 100% relief on qualifying expenditure up to £1 million per year. This allowance has been a cornerstone of UK tax policy, enabling small and medium-sized enterprises to write off significant capital investments immediately against their taxable profits. Keeping this in place ensures that businesses can continue to rely on this substantial relief when making capital investments in property and facilities.
Full Expensing was introduced in 2023 and made permanent in March 2024, allowing companies to deduct 100% of qualifying plant and machinery costs from taxable profits. This scheme particularly benefits larger corporations that might exceed the AIA threshold, providing them with immediate tax relief on substantial capital investments.
Writing Down Allowances (WDAs) remain available for expenditure that doesn’t qualify for AIA or full expensing. These allowances typically provide relief at 18% per year for main pool assets and 6% for special rate pool assets, using a reducing balance method. While less generous than full immediate relief, WDAs still provide valuable ongoing tax benefits for business investments. Starting on the 1 April 2026 the rate will be reduced from 18% to 14% for corporation tax, and 6 April 2026 for income tax.
Structures and Buildings Allowance (SBA) continues to offer a 3% straight-line deduction each year for eligible building costs. This allowance has become increasingly important as businesses invest in new facilities and refurbish existing properties to meet modern operational requirements and environmental standards.
40% First-Year Allowance (FYA) is a new allowance that started on 1 January 2026. This applies to new and unused main rate capital expenditure. It’s available to all businesses, but its prime benefit is in relation to assets purchased for leasing, which were previously excluded from other reliefs. It is also available to unincorporated businesses, which may be useful where the Annual Investment Allowance limit has been exceeded, as those businesses are not able to claim Full Expensing.
The Spring Forecast UK 2026 left these reliefs unchanged. We would however invite changes, particularly to the SBA and Special Rate pool, with an increase to the rate at which businesses can draw on the allowances.
Speak to our capital allowance specialists for a free initial review of your planned investments.
Why Stability in Capital Allowances Matters for Businesses
The capital allowances system has undergone several significant changes over the past few years, creating considerable uncertainty for tax planners and businesses. The super-deduction regime introduced during the pandemic, followed by its replacement with full expensing, required businesses to continuously adapt their investment strategies and tax planning approaches.
Consistency for Long-Term Planning
By leaving capital allowances unchanged in the Spring Forecast 2026, this allows businesses to plan, especially those with long-term investments, such as:
- Manufacturing companies upgrading equipment over multiple years
- Property investers embarking on major construction projects
Clarity for Accountants and Advisors
For accountants and tax advisors, stability means clearer guidance and more predictable outcomes. Benefits include:
- Ability to focus on optimising existing reliefs rather than learning new rules
- Easier advice on property purchases, renovations, fit-outs, or equipment upgrades
- Reduced risk of mistakes or missed opportunities due to changing legislation
Maximising Existing Claims
We would stress the importance of ensuring that existing claims are optimised, especially when it comes to uncovering embedded allowances in commercial buildings, which are often overlooked. Many businesses fail to claim all available allowances simply because they lack awareness of what qualifies or how to properly identify qualifying expenditure within their capital investments.
How Businesses Can Maximise Capital Allowances in 2026
Even without changes, capital allowances remain a valuable and often underutilised relief that can significantly reduce tax liabilities for businesses across all sectors. The unchanged regime means that businesses should focus on maximising the benefits available under current rules rather than waiting for potential future enhancements.
Comprehensive expenditure reviews should be conducted to ensure all qualifying costs are being claimed. Many businesses inadvertently miss opportunities by failing to identify qualifying items within larger capital projects. For example, when purchasing a building, elements such as heating systems, electrical installations, and security equipment may qualify for capital allowances rather than being treated as part of the building structure.
Early planning integration becomes even more critical when capital allowances remain stable. Businesses should consider allowance implications at the earliest stages of any significant purchase or refurbishment project. This early consideration can influence procurement decisions, contract structures, and project timing to maximise tax benefits.
Professional expertise remains essential for complex transactions, particularly when buying or selling commercial property. Capital allowances can be permanently lost if not properly addressed in purchase agreements and transfer documents. The unchanged regime means that the technical complexities of allowance claims remain as intricate as ever, requiring specialist knowledge to navigate effectively.
Practical Action Steps for Businesses
Given the unchanged allowances, businesses should take proactive steps to ensure they maximise benefits under current rules. This requires a systematic approach to identifying, claiming, and optimising capital allowance opportunities.
Conduct comprehensive asset audits to identify previously overlooked qualifying expenditure. Many businesses have unclaimed allowances from past investments that can still be recovered through amended tax returns, subject to normal time limits.
Implement robust procurement processes that consider capital allowance implications from the outset. This includes ensuring that purchase agreements properly identify qualifying and non-qualifying elements of complex acquisitions, particularly for property transactions.
Establish regular review mechanisms to assess capital expenditure plans against available allowances. This forward-looking approach enables businesses to time investments strategically and structure purchases to maximise tax benefits.
Maintain detailed records of all capital expenditure, including supporting documentation that clearly establishes the business purpose and technical specifications of purchased assets. Proper record-keeping becomes increasingly important as businesses grow and their capital allowance claims become more complex.
Embracing Stability and Optimising Opportunities
Rather than viewing this as a missed opportunity, businesses should recognise it as a green light to fully exploit the generous reliefs already available to them.
The real winners will be those companies that take action now, conducting thorough reviews of their capital expenditure, engaging specialist advisors where needed, and building capital allowances into their strategic planning processes. With the regulatory landscape settled for the foreseeable future, there’s no excuse for leaving money on the table through unclaimed or poorly optimised allowances.
For tax advisors and finance teams, this stability offers a chance to demonstrate real value by ensuring their organisations are squeezing every available benefit from the current system.
Sectoral Implications and Strategic Considerations
The impact of unchanged capital allowances varies across different industries. Here’s how key sectors are affected:
Manufacturing
Manufacturing businesses often make substantial investments in plant and machinery. Under the unchanged regime:
- Annual Investment Allowance (AIA) and full expensing continue to provide significant relief
- Companies can maintain a competitive edge through regular equipment upgrades
- Tax impacts are minimised, supporting long-term operational planning
Retail and Hospitality
Retailers and hospitality businesses, often operating on tight margins, gain from:
- Continued relief on fit-out costs, refrigeration equipment, and specialised assets
- Improved cash flow through immediate tax deductions
- Better returns on investment for refurbishments and new projects
Property Investors and Construction
Property developers and construction companies rely on:
- Capital allowances on qualifying plant and machinery within projects
- Greater certainty for feasibility assessments and long-term development plans
Find out how much you could reclaim with a specialist property capital allowance review.
Looking Ahead to Future Budget Changes
While capital allowances remained unchanged in the Spring Forecast 2026, this doesn’t mean future changes won’t happen. Economic conditions and government priorities could influence potential reforms in the coming years.
Key Areas to Watch
The government may consider changes to capital allowances as it balances business growth, climate goals, and public finances. Possible focus areas include:
- Environmentally Sustainable Investments
- Enhanced relief for renewable energy equipment
- Incentives for energy-efficient building systems
- Support for carbon capture technologies
- Digital Transformation Incentives
- Potential allowances for automation and robotics
- Incentives for artificial intelligence and advanced software
- Support for digital infrastructure that improves productivity
- Regional Development Considerations
- Reliefs designed to encourage investment in specific areas
- Possible variations in allowance rates or thresholds for priority sectors
- Policies targeting economic growth in underdeveloped regions
Take a look at how you can maximise claims with a site survey...
Frequently Asked Questions
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Did the Spring Forecast 2026 change capital allowances in the UK?
No, the Spring Forecast 2026 capital allowances remained completely unchanged. Chancellor Rachel Reeves chose to maintain the existing framework of reliefs.
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What capital allowance schemes remain available in 2026?
All existing UK capital allowances schemes continue to be available, including the Annual Investment Allowance (AIA) at £1 million, full expensing for qualifying plant and machinery, Writing Down Allowances (WDAs) at standard rates, 40% First Year Allowances for all businesses, and the Structures and Buildings Allowance (SBA) at 3% per year. These schemes provide comprehensive coverage for most types of business capital expenditure.
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How does the Spring Forecast 2026 impact UK businesses claiming tax relief?
The Spring Forecast 2026 impact is essentially neutral in terms of capital allowances, meaning companies can continue claiming relief under existing rules without any changes to rates, thresholds, or qualifying conditions.
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Can companies still use full expensing and Annual Investment Allowance in 2026?
Yes, both full expensing and the Annual Investment Allowance remain fully available. Companies can continue to claim 100% immediate relief on qualifying plant and machinery through full expensing, while the AIA continues to provide £1 million of immediate relief annually for businesses of all sizes on qualifying expenditure.
Contact our capital allowances specialists today to ensure you're claiming every tax relief available to your business...
Latest News
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19 March 2026Spring Forecast 2026: Capital Allowances Remain Unchanged
The Spring Forecast 2026 confirmed that capital allowances will remain unchanged. This means the current Annual Investment Allowance, Full Expensing, and other key reliefs continue as previously announced. For businesses investing in plant, machinery, and commercial property, this provides short-term... -
3 March 2026How UK Businesses Can Avoid Costly Structures and Buildings Allowance (SBA) Errors
There’s a critical truth about Structures and Buildings Allowance (SBA) that many property developers, investors, business owners, and even experienced accountants aren’t aware of: once you’ve claimed SBA on expenditure, that decision is permanent and irreversible. If it’s been claimed...
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