The start of the new tax year brings with it the opportunity for businesses to take advantage of the Chancellor’s capital allowances package.
A new regime has been introduced to boost investment and spur UK growth, with a £27 billion cut to corporation tax, via Jeremy Hunt’s new full expensing policy, expected to boost investment by three per cent in each of the next three years.
Other tax changes coming into force include more business rates relief, extension to the fuel duty cut and a £450 income tax cut for carers.
The package, announced in the Spring Budget, comprises 100 per cent full expensing and a 50 per cent first-year allowance. It will mean the UK has the most generous capital allowance regime in the OECD, amounting to an effective £9 billion a year tax cut for companies.
Companies urged to take advantage
Victoria Atkins, Financial Secretary to the Treasury, said: “We are determined to make the UK the best place in the world to do business, which is why businesses can start to benefit from the raft of tax cuts on offer to boost their growth.
“With full expensing, the more a company invests the less tax they’ll pay, and I encourage companies of any size to take full advantage of this world-leading reform.”
With the new 25 per cent corporation tax rate coming in for the top 10 per cent most profitable companies, and the super-deduction ending, the Chancellor used his Spring Budget to ensure that the UK’s tax system fosters the right conditions for enterprise, investment and growth.
Full expensing lets companies deduct 100 per cent of the cost of certain plant and machinery investments from their profits before tax. It is available until 31 March 2026. It provides the same generosity as the super-deduction, saving firms up to 25p in every £1 of qualifying investment and is for main rate assets – such as construction, warehousing and office equipment.
The 50 per cent first-year allowance lets companies deduct half of the cost of other plant and machinery, known as special rate assets, from their profits during the year of purchase. This includes long life assets such as solar panels and lighting systems.
Changes to air passenger duty
Other tax measures coming into effect include new domestic and ultra-long Air Passenger Duty bands.
For passengers flying in economy class, the new domestic band will be set at £6.50, a 50 per cent cut to bolster UK-wide connectivity, while the new ultra long-haul band will be set at £91, meaning those who fly the furthest will pay the greatest level of duty.
Transport Secretary Mark Harper said: “Transport binds the United Kingdom together, and this cut to Air Passenger Duty will make travelling between our family of nations easier than ever.
“Boosting transport links between our four nations sustains jobs, creates opportunities and is an essential part of this Government’s plan to grow the economy.”
Further tax measures include:
- The planned 11p rise in fuel duty has been cancelled, saving a typical driver another £100 on top of the £100 saved so far since last year’s cut.
- More business rates relief, as part of the Chancellor’s £13.6 billion package from 2022’s Autumn Statement.
- The Annual Investment Allowance (AIA), an existing measure which also supports business investment, has been increased permanently to £1 million.
- Expanding the Seed Enterprise Investment Scheme (SEIS) to help more UK start-ups raise higher levels of finance. This package will help over 2,000 start-up companies access finance.
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