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Full Expensing Scheme

Take the sting out of buying new capital equipment with full expensing. Set the full cost of your new machine tools from Colchester Machine Tool Solutions against your annual profits all at once. Instead of paying too much tax, get the equipment you need to make your business grow.

What is full expensing?
Full expensing is a capital allowance tax scheme that lets UK companies deduct 100% of the cost of capital equipment from their profits in the year it is bought, instead of spreading the cost across multiple tax years. First introduced in the UK Government’s spring budget 2023, the scheme was set to expire on 31 March 2026, but it was made permanent in the Chancellor’s Autumn Statement in November 2023. Full expensing is here to stay.

How does it work?
Full expensing allows UK companies to deduct the full cost of new and unused plant and machinery from their taxable profits in the year of purchase. Full expensing allows companies to write off 100% of the cost of investment in qualifying plant and machinery in one go – equivalent to a tax saving of up to 25p for every £1 spent. There is no minimum or maximum amount of investment. Businesses can claim full expensing relief on all qualifying expenditures.

Note that there are special capital allowance rules relating to assets acquired on hire purchase or finance leases, as with equipment bought using asset finance, or similar business loans. Generally, these assets are treated as belonging to the business using them, even though legal ownership may not pass until a final payment is made at the end of the contract term. Businesses should also be aware that any interest on hire purchase items is classed as a revenue (trading) expense and not part of the capital expenditure and cannot be claimed back with full expensing.

An example of full expensing
A company incurs expenditure of £1.5m on new state-of-the-art machine Tools from Colchester Machine Tool Solutions. Without the benefit of full expensing, the business would be required to spread the allowances on this investment over multiple years, limiting the immediate deduction available. However, with full expensing, the business is able to deduct the entire £1.5m in the tax year of the purchase.

Assuming the company is subject to the main rate of Corporation Tax, the company stands to save £375,000 in taxes (£1.5m x 25%) in the year 2024 through full expensing. As a result, the company’s cash flow is improved and has the opportunity to reinvest the tax savings offered by full expensing into further operational improvements or additional strategic investments.

What if my profits are too low or I've made a loss?
Under full expensing you can only claim against your pre-tax profits. If the value of the assets you have bought are higher than your profits, or you have zero profits because you have made a loss, you can set part of the asset charge against whatever profits you have. The balance of the value of the asset can then be rolled over and set against profits, using full expensing, in the next tax year.

Contact us to discuss your machine tool requirements 01924 415000 /