Capital Allowances: what should you review before your December year end?

If your business has a 31 December year end and has invested in property, equipment or machinery, now is a good time to review that expenditure to ensure the available tax relief is identified in the right accounting period.

The timing of capital expenditure can affect the accounting period in which tax relief is available. Reviewing what you have already spent during 2026, as well as investment you are planning, can help you identify the allowances available and make informed decisions before your year end.

It is also important to look back. If you invested in qualifying assets during earlier accounting periods but did not claim all the Capital Allowances available, there may still be time to review and amend your position.

1 | What have you invested in during 2026?

Capital Allowances provide tax relief on certain types of capital expenditure. Depending on what you have invested in, different allowances and rates may apply.

For expenditure incurred during 2026, you may have access to several different capital allowance routes depending on the expenditure and your business type, including the £1 million Annual Investment Allowance, full expensing, the 50% first-year allowance for special rate assets, and — mainly for leasing businesses and unincorporated businesses that can’t access full expensing — the 40% first-year allowance introduced for qualifying expenditure from 1 January 2026.

Before your December year end, review the capital expenditure you have incurred and ask yourself:

→   What capital expenditure have we incurred during 2026?
→   Are all qualifying assets being identified?
→   Are embedded fixtures within property expenditure being picked up?
→   Which allowance gives the appropriate treatment?
→   Is significant expenditure planned for early 2027 that should be considered as part of year-end tax planning?
→   Have previous property acquisitions, refurbishments or fit-outs been reviewed for missed allowances?

The timing of expenditure is relevant because Capital Allowances are claimed for an accounting period, and the date on which expenditure is treated as incurred can determine when the relief is available. For example, the Annual Investment Allowance can only be claimed in the period in which the qualifying asset is treated as bought.

Reviewing planned investment before your year end can therefore help you understand the tax treatment and timing before committing to expenditure.

2 | Could you have missed Capital Allowances on earlier investment?

Your current-year expenditure is only one area to review. Did your business invest in property, equipment or machinery in 2024? 31 December could be an important deadline for making or amending certain Capital Allowance claims for that period.

If your business has previously purchased property, carried out a refurbishment or fit-out, or invested in plant and machinery, check whether all potentially qualifying expenditure was identified at the time.

Capital Allowances can sometimes be missed because qualifying costs form part of a much larger project or are not immediately identifiable as plant and machinery. This can be particularly relevant to fixtures and other qualifying assets incorporated into a building.

For a company with a 31 December year end, historic expenditure may also be approaching an amendment deadline.

»    Capital Allowance claims can generally be made, amended or withdrawn up to the first anniversary of the filing date for the relevant Company Tax Return. For a standard accounting period ended 31 December 2024, 31 December 2026 will normally be the deadline for amending the Company Tax Return for that period. However, different time limits can apply depending on the allowance and expenditure involved.

If your business invested in property, equipment or machinery during 2024 and that expenditure has not been fully reviewed, it is therefore important to check your position before the deadline passes.

3 | Your Capital Allowances year-end checklist

BEFORE 31 DECEMBER, CONSIDER:

✓   What capital expenditure have you incurred during 2026?
✓   Has all potentially qualifying expenditure been identified?
✓   Have property acquisitions, refurbishments and fit-outs been fully reviewed?
✓   Could embedded fixtures or other qualifying assets have been missed?
✓   Are you using the appropriate Capital Allowances for your expenditure?
✓   Do you have significant capital investment planned for early 2027?
✓   Did you invest in qualifying assets during 2024 that may not have been fully claimed?

Your December year end is a useful point to review both the investment you have already made and what you are planning next.

If you have any questions about whether your capital expenditure could qualify for Capital Allowances, whether previous investment may have been overlooked or how the timing of planned expenditure could affect your claim, get in touch with the ABGi team and we will be happy to help. If you are unsure whether your 2024 capital expenditure qualify, the ABGi team can conduct a complimentary pre-screening review before the December deadline closes.