Entity Setup
How UK Business Owners Can Leverage New Capital Allowances for Plant, Machinery & EV Chargepoints
Understand the fresh enhancements in capital allowances—from the new first-year allowance to changes in writing-down rates—and how UK businesses can optimize tax reliefs in 2026-27.
By NomadicTax Research Team • 5-8 min read • May 26, 2026
## Overview of New Capital Allowances Rules
From **Budget 2025**, several key changes have been made to UK's capital allowances regime, particularly affecting plant, machinery and electric vehicle infrastructure.([gov.uk](https://www.gov.uk/government/publications/new-first-year-allowance-and-main-rate-of-writing-down-allowances/capital-allowances-new-first-year-allowance-and-reducing-main-rate-writing-down-allowances?utm_source=openai)) Here’s what you need to know:
| Change | Effective Date | Applies To |
|---|---|---|
| **Reduction of main rate Writing-Down Allowance (WDA)** from **18% to 14%** | 1 April 2026 (Corporation Tax) / 6 April 2026 (Income Tax) | Main rate assets excluding second-hand and high-emission cars ([gov.uk](https://www.gov.uk/government/publications/new-first-year-allowance-and-main-rate-of-writing-down-allowances/capital-allowances-new-first-year-allowance-and-reducing-main-rate-writing-down-allowances?utm_source=openai)) |
| **New First-Year Allowance (FYA) of 40%** for eligible assets | From **1 January 2026** | Main rate assets; unincorporated businesses and those using assets for leasing included; second-hand assets and cars excluded ([gov.uk](https://www.gov.uk/government/publications/new-first-year-allowance-and-main-rate-of-writing-down-allowances/capital-allowances-new-first-year-allowance-and-reducing-main-rate-writing-down-allowances?utm_source=openai)) |
| **Extension of 100% FYA for zero-emission cars and EV chargepoints** | Corporation Tax: to 31 March 2027; Income Tax: to 5 April 2027 | New purchases of qualifying zero emission cars & chargepoints ([gov.uk](https://www.gov.uk/government/publications/first-year-allowances-for-zero-emission-cars-and-electric-vehicle-chargepoints/capital-allowances-extension-of-first-year-allowances-for-zero-emission-cars-and-chargepoints?utm_source=openai)) |
## Actionable Insights for Businesses and Their Advisors
### 1. Timing Your Investments
- If you’re planning to buy **plant & machinery**, accelerate expenditure into April–December 2026 to take advantage of the **40% FYA**, especially for Corporation Tax-paying entities. After this window, the relief is less generous due to lower WDAs.
- For **zero-emission cars or EV chargepoints**, any qualifying purchase before **31 March 2027** (Corp Tax) or **5 April 2027** (Income Tax) can qualify for **100% first-year allowance**, giving full deduction in year of purchase.([gov.uk](https://www.gov.uk/government/publications/first-year-allowances-for-zero-emission-cars-and-electric-vehicle-chargepoints/capital-allowances-extension-of-first-year-allowances-for-zero-emission-cars-and-chargepoints?utm_source=openai))
### 2. Asset Filtering for Optimal Reliefs
- **Exclude second-hand assets and cars**: These do **not** qualify under the new 40% FYA. If you intend to buy used equipment, rely on the WDA at the reduced 14% rate.([gov.uk](https://www.gov.uk/government/publications/new-first-year-allowance-and-main-rate-of-writing-down-allowances/capital-allowances-new-first-year-allowance-and-reducing-main-rate-writing-down-allowances?utm_source=openai))
- For clean vehicles and charging infrastructure, ensure compliance with “qualifying expenditure” definitions to access 100% relief. Keep detailed documentation.([gov.uk](https://www.gov.uk/government/publications/first-year-allowances-for-zero-emission-cars-and-electric-vehicle-chargepoints/capital-allowances-extension-of-first-year-allowances-for-zero-emission-cars-and-chargepoints?utm_source=openai))
### 3. Structuring Ownership and Taxable Entity Choices
- Unincorporated businesses can claim the FYA (40%) from January 2026—even though many allowances historically favored corporations.([gov.uk](https://www.gov.uk/government/publications/new-first-year-allowance-and-main-rate-of-writing-down-allowances/capital-allowances-new-first-year-allowance-and-reducing-main-rate-writing-down-allowances?utm_source=openai))
- Leasing assets also qualify under FYA if they meet the definitions—review lease contracts and ensure terms satisfy qualifying criteria.
### 4. Examples
- **Corp tax payer** buys new machinery costing £100,000 on **15 February 2026**: can claim **40% FYA**, i.e. £40,000 deduction; remaining £60,000 enters main rate WDA at 14%. Saves significantly on taxable profits.
- **Landlord** who buys an EV chargepoint in **June 2026**: 100% cost can be relieved in the year of expenditure under first-year allowance.
- Business investing in second-hand machine for leasing in **October 2026**: excluded from FYA, so full cost taxed via WDA at 14%, applying over its depreciation life.
## Risks & Things to Watch
- Legislative definitions may include **anti-circumvention rules**—avoid classifying assets differently for undeserved relief. HMRC may look for substance over form.
- **Cashflow implications**: only first-year allowances give accelerated relief. Those using WDA must plan for lower deductions over time.
- **Record keeping**: ensure accurate tracking of assets, dates, costs, eligibility criteria, and whether assets are leased, new, excluded, etc.
## Summary
With the reduction in WDAs and the addition of high FYA incentives, the UK tax environment is favourable for businesses investing **early** in eligible assets—especially zero-emission vehicles and EV chargepoints. To maximize reliefs:
- Plan expenditures before key deadlines;
- Ensure assets meet definitions;
- Choose entity structure wisely;
- Keep strong records;
- Understand cashflow impact of spreading versus front-loading deductions.
By doing so, businesses can meaningfully reduce tax liabilities and accelerate returns on capital investment under the reformed allowances.