A guide to full expensing – What does it mean for my business?

In his 2024 Spring Budget, Chancellor Jeremy Hunt announced several measures for long-term business growth with a focus on investment, particularly for SMEs.

One key announcement that will be beneficial to businesses is the extension of full expensing to assets for leasing. You can read about the other measures that might affect your business in the coming months here. 

Here, we explain what full expensing means and its potential benefits to your business.

What is full expensing?

Full expensing allows certain businesses to deduct 100% of the cost of capital expenditure (e.g. qualifying vehicles, equipment or machinery) from their taxable profits in the year it was purchased.

This effectively reduces the cost of your new asset by up to 25%, depending on your rate of  corporation tax. So, for example, if your corporation tax rate is 25%, for every pound you spend on capital expenditure, you will pay 25p less tax.

What changed in the Spring Budget?

In his 2023 Autumn Statement, the Chancellor made full expensing for qualifying plant and machinery investment permanent. This was initially announced as a temporary measure in March 2023, and then made permanent in November 2023. 

Following the announcement of permanent full expensing in the Autumn Statement, the Chancellor extended this to assets for leasing as soon as fiscal conditions allow. Draft legislation is expected to be published shortly.

What assets qualify for full expensing?

Full expensing applies to all new and unused plant and machinery purchases used within the course of business. Capital expenditure that may qualify includes:

• Machines, such as computers and printers
• Office equipment
• Vans, lorries and tractors 
• Warehousing equipment
• Tools
• Construction equipment
• Some fixtures, such as kitchen and bathroom fittings
• Fire alarm systems in non-residential property

Are there any tax breaks I can claim for cars?

While cars are not included in full expensing, there are tax breaks available for low-emission cars. 

New and unused electric cars or cars with zero CO2 emissions qualify for ‘100% first year allowances’, which means you could deduct the full cost of a new low-emission car from your profits before tax.

To read more about these tax breaks and see if your expenditure might be eligible, read our blog: Tax breaks and schemes for low-emission vehicles.

Am I eligible for full expensing?

Full expensing is only available to businesses that are subject to corporation tax. 

Can I get help to finance the purchase of new equipment?

Our new asset finance service could make the purchase of new equipment more affordable, and help you get your equipment as soon as possible.

With the support of our panel of trusted partners we’ll do all the legwork to find you the best deals from across the market – so you can get the finance you need to purchase any equipment up front. 

How do I apply?

To see how we could help your business, apply online in 10 minutes and you’ll get a decision in as little as 24 hours. 

01/04/24: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice. 

¹Spring Budget 2024