If your business invests in equipment, vehicles, or machinery, capital allowances are an important way to reduce your tax bill.
However, from April 2026, there’s a key change to be aware of. The rate of writing down allowances (WDAs) for main rate assets is being reduced—and this could affect how quickly you get tax relief on your investments.
So, what’s changing, and what does it mean in practice?
A Quick Refresher: What Are WDAs?
When you buy assets for your business, you can’t always claim the full cost upfront.
If you don’t claim (or can’t claim) first year allowances—such as the Annual Investment Allowance or full expensing—you instead claim relief gradually through writing down allowances (WDAs).
These are applied each year to reduce the remaining value of your assets.
What’s Changing from April 2026?
From April 2026, the rate of WDAs for main rate assets is reducing:
- Previously: 18%
- From April 2026: 14%
This applies:
- From 1 April 2026 for companies
- From 6 April 2026 for individuals
This means you’ll get tax relief more slowly over time.
So, the question is—could delaying investment now cost you more in the long run?
What About Special Rate Assets?
Not all assets are treated the same.
Some types of expenditure fall into the special rate pool, including:
- Integral features (like electrical systems or air conditioning)
- Long-life assets
- Solar panels and thermal insulation
- Cars with higher CO₂ emissions
These assets already receive a lower rate of relief at 6% per year, and this rate remains unchanged.
How Does This Work in Practice?
Let’s look at a simple example.
A company prepares accounts to 30 June each year. At the start of the year, it has £150,000 in its main rate pool. During the year, it purchases two low-emission cars costing £35,000 each, which are added to the pool.
Because the accounting period spans the rate change in April 2026, a blended (hybrid) rate must be used.
Part of the year is calculated at 18%, and part at 14%, resulting in an overall rate of 17% for that period.
This gives a total WDA claim of £37,400 for the year.
Why This Matters
A reduction from 18% to 14% might not seem significant, but it means:
- You’ll recover the cost of assets more slowly
- Your tax relief is spread over a longer period
- Cash flow could be impacted, especially for businesses investing heavily
Over time, this can make a noticeable difference.
What Should You Be Thinking About?
If you’re planning to invest in new equipment or vehicles, timing could be key.
You might want to consider:
- Whether you can bring forward planned purchases
- If you’re making full use of first year allowances
- How this change affects your cash flow and tax planning
Every business is different, so it’s worth reviewing your plans carefully.
Let’s Talk
Not sure how these changes will affect your business?
At Jon Davies Accountants, we help business owners across the UK make informed decisions about investments and tax planning.
If you’d like to discuss your situation, get in touch with Jon or the team today for tailored advice.
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Any questions?
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