The current FYA allows a company to deduct 100% of the cost of new and unused plant and machinery from its taxable profit. A company can also claim 50% of any new integral features and long-life assets. Until now, this relief could not be applied to assets which were leased out and was unavailable to unincorporated business.
From 1 January 2026, the scope of FYA has widened by allowing a 40% deduction to be claimed on new plant and machinery items purchased by companies and unincorporated businesses. Leased and subleased assets also qualify for relief provided the asset will be used in the UK.
The FYA applies to the first year an asset is acquired. The standard writing down allowance can be claimed on the remaining balance in subsequent years.
While this offers an attractive saving to unincorporated businesses and to leasing and rental businesses, those interested in the relief should note that many of the FYA exclusions still apply. Cars and second-hand assets remain ineligible for the enhanced allowance.
The popular Annual Investment Allowance continues to be available.