Writing Down Allowance Cut: What It Means for Business Investment

The government has announced major changes to capital allowances that will impact how businesses plan future investment. From April 2026, the main rate of writing-down allowance (WDA) on plant and machinery will fall from 18% to 14%, slowing the rate at which tax relief is received.

In addition a new 40% first-year allowance (FYA) will be introduced from 1 January 2026 for main-rate assets, although it won’t apply to cars, second-hand items, or assets used for overseas leasing. Hybrid rates will apply for accounting periods that straddle the change.

While the government argues the reforms will boost future investment, many business leaders warn the opposite. The slower WDA rate could deter long-term investment and reduce cashflow benefits – raising around £1.5bn a year for the Treasury.

What should businesses do now?

• Reassess capital expenditure plans
• Consider timing investments before April 2026
• Check eligibility for the new 40% FYA
• Model the cashflow impact of reduced WDAs

We recommend you revisiting your investment timelines to ensure they remain tax-efficient under the new regime. Call us to discuss how these changes my affect your business and the opportunities available.