Understanding the 2026 writing down allowance cuts

From April 2026, a key change to the UK capital allowances regime will affect how quickly businesses can claim tax relief on certain types of capital expenditure. The main rate writing down allowance (WDA) for plant and machinery will reduce from 18% to 14%, extending the period over which tax relief is received. While this change does not remove entitlement to the relief, it does alter its timing. For businesses with existing capital allowance pools or with expenditure that does not qualify for accelerated reliefs, the impact could be significant. As a result, understanding how the revised rules work and how they interact with other available allowances has become an increasingly important aspect of tax planning.

What is a writing down allowance?

WDAs form part of the UK’s capital allowances framework and provide tax relief on qualifying capital expenditure, such as plant and machinery. Instead of deducting depreciation shown in the accounts, tax relief is calculated using specific statutory rates.

WDAs apply where expenditure:

• has been allocated to a capital allowance pool
• does not qualify for full upfront relief, either because accelerated allowances are unavailable or were not claimed.

Relief is granted on a reducing balance basis, meaning a percentage of the remaining pool balance is deducted each year. Although recent years have seen greater emphasis on first-year reliefs, WDAs remain highly relevant for many businesses, particularly those with historic expenditure still being relieved over time.

What is changing in April 2026?

A lower main rate of relief

From April 2026, the main pool WDA rate will reduce from 18% to 14%. This represents a permanent slowdown in the annual rate at which qualifying expenditure is relieved for tax.

Different effective dates

The change takes effect on different dates depending on the tax position of the business:

• 1 April 2026 for businesses within the Corporation Tax regime
  
• 6 April 2026 for businesses within the Income Tax regime, including sole traders and partnerships.

Hybrid rates for transitional periods

Where an accounting period spans the relevant April 2026 date, a hybrid WDA rate applies. The allowance for that period is calculated by apportioning time before the change at 18% and time after the change at 14%. This ensures the deduction aligns accurately with the legislation.

What does this mean in practice?

• Slower tax relief: A reduction in the WDA rate means a smaller deduction in each accounting period, increasing taxable profits in the short term compared with the previous regime. Although total relief is still available over time, the delay could affect cash flow and tax forecasting.
• Greater impact for existing pool balances: Businesses with significant historic expenditure in their main pools are more exposed, particularly where that expenditure falls outside accelerated allowances.
• Increased importance of planning: As relief becomes more sensitive to timing and eligibility, decisions around capital investment, accounting periods, and allowance claims become more consequential.

Sector observations and planning opportunities

Although the change applies across all sectors, its practical impact is often more pronounced for capital-intensive organisations that rely on regular reinvestment cycles.

Organisations with ongoing expenditure on equipment, infrastructure, or operational assets may find that lower WDAs extend the period over which tax relief is realised, particularly where those assets do not qualify for full upfront relief.

That said, businesses still have tools available to manage the impact through effective use of the existing capital allowances framework. 

• Annual Investment Allowance (AIA): Where available, the AIA can provide 100% relief on qualifying expenditure, reducing reliance on WDAs altogether. First-year allowances: A new 40% First-year allowance (FYA) applies to qualifying new and unused main rate plant and machinery acquired from 1 January 2026, subject to specific conditions and exclusions. For certain types of expenditure, this can significantly accelerate relief compared with WDAs.
• Full expensing: For companies, full expensing remains available for eligible expenditure, although exclusions continue to apply. Where full expensing is unavailable, careful consideration of FYAs and WDAs is essential.
• Accounting period awareness: For businesses with accounting periods that straddle April 2026, understanding hybrid WDA calculations can be important when forecasting tax liabilities and assessing investment timing.

Looking ahead

The reduction in the main WDA rate reinforces the importance of having a clear and considered capital allowances strategy. While the relief is still there, it is delivered more slowly, increasing the value of early analysis and structured planning.

Understanding which assets qualify for AIA, first-year allowances, full expensing, or WDAs and how those rules apply over time — can help businesses make informed investment decisions and avoid unintended tax outcomes.

Capital allowances are rarely a one-size-fits-all exercise. Reviewing existing pools, upcoming investment plans, and allowance eligibility can often identify opportunities to improve the timing of tax relief without altering underlying commercial decisions. If you would like to discuss how the 2026 WDA changes may affect your business or review whether your capital expenditure is being relieved as efficiently as possible, please contact your usual Crowe contact.