HMRC updates guidance for claiming new allowance

Qualifying expenditure on plant and machinery can qualify for a 40% first-year allowance from 1 January 2026. HMRC has now updated its guidance to help make claims. What do you need to do?

The new 40% first-year allowance (FYA) is available to companies as well as unincorporated businesses. Perhaps the biggest winners will be companies that purchase assets and lease them out, as these assets are excluded from full expensing, and so 100% relief is limited to the £1 million annual investment allowance. Until this year, the only option for relieving any excess was through writing down allowances on a reducing balance basis.

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tax return, but HMRC’s corporation tax online service will not be updated for the new allowance until 2027. A company that wants to make a claim in the meantime, e.g. one with a year end of 31 March 2026 filing this year, will need to use a workaround. HMRC has now updated its guidance, saying that claimants should use: