Retailers investing in stores, logistics and equipment will be able to cut their tax bills as the new 40% first-year allowance for plant and machinery comes into force.
The permanent relief, effective from yesterday (1 January), allows businesses to deduct 40% of the cost of qualifying main-rate assets and machinery investments, such as warehouses or construction equipment, in the year of purchase.
It was first announced by chancellor Rachel Reeves during the Budget in 2025 as part of a broader push to bolster business spending and economic growth.
Related Story
The Government said the move builds on the UK’s “one of the most generous” capital allowances regimes globally, alongside full expensing, which allows companies to deduct 100% of qualifying plant and machinery costs in year one.
Corporation tax will remain capped at 25% for the rest of the Parliament.
“Saving tax for businesses that are investing is key to building the confidence needed to boost growth,” said Reeves.
“We are building on the UK’s capital allowance regime – one of the most generous in the world – alongside capping Corporation Tax and enabling more scale ups to attract investment to help create a tax system that supports growth.
Click here to sign up to Retail Gazette‘s free daily email newsletter
