Does the cut from 18% to 14% mean I lose capital allowances?

No. A writing down allowance is a reducing-balance calculation, not a cap, so the pool is still relieved in full eventually — you simply get the deductions later. Over the whole life of the pool the total relief is identical. What changes is the timing, and timing is cash. On a £180,000 main pool the first year gives £25,200 of deduction instead of £32,400, and clearing 90% of the pool takes about 15.3 years rather than 11.6. Treat it as a deferral of tax relief rather than a loss of it, because that is what it is, and plan the cash accordingly.

When exactly does the 14% writing down allowance start?

For businesses within the charge to Corporation Tax it applies from 1 April 2026, and for businesses within the charge to Income Tax from 6 April 2026. The rate attaches to the chargeable period, not to the date you bought the asset, so buying earlier does not preserve the 18% rate on the pool. Accounting periods that straddle the change get a hybrid rate apportioned across the two parts of the period. A company with a 31 December 2026 year end therefore has roughly three months at 18% and nine at 14%, which works out at about 15% for that year.

What is the new 40% first-year allowance and does it apply to me?

It is a 40% first-year allowance on qualifying main rate plant and machinery, for expenditure incurred from 1 January 2026. It matters where the £1 million Annual Investment Allowance or full expensing are unavailable or not preferred — most obviously for unincorporated businesses, which cannot use full expensing, and for leasing and hire businesses, which are generally shut out of the AIA on assets bought to lease out. Second-hand assets, cars and overseas leasing are all excluded. If your annual plant spend sits comfortably inside the £1 million AIA, this allowance will not change your figures.

Has the special rate pool changed too?

No. The special rate pool writing down allowance stays at 6%, and HMRC's policy paper is explicit that this measure does not change it. That widens the gap between the two pools from 12 percentage points to 8, which makes the split between them less financially dramatic than it was but no less worth getting right. The special rate pool is where integral features, thermal insulation, long-life assets and cars emitting over 50g/km of CO2 sit. Cars of 50g/km or less go into the main pool and so do move from 18% to 14%.

What should I actually do about this before my next year end?

Three things. Find the main pool balance carried forward on last year's tax computation and multiply it by 4% — that is the deduction the change costs you in year one, and your Corporation Tax rate turns it into cash. Then check every asset bought since 1 January 2026 that was refused the AIA or full expensing, because the new 40% first-year allowance may now cover it. Finally, if either pool is down to £1,000 or less, claim the small pools allowance and clear the whole balance in one go instead of dribbling it out at 14% or 6%.

The writing down allowance drops to 14% on 1 April. Your relief isn't smaller — it's slower.

Two changes to capital allowances have landed with very little noise, and between them they change the shape of every plant and machinery claim in the country. The first is a cut: the main rate writing down allowance falls from 18% to 14%. The second is an addition: a new 40% first-year allowance on qualifying main rate expenditure.

The dates matter and they are not the same date. Per HMRC's policy paper on the measure, the 40% first-year allowance applies to expenditure incurred from 1 January 2026. The writing down allowance cut applies from 1 April 2026 for businesses within the charge to Corporation Tax and 6 April 2026 for those within the charge to Income Tax.

Most of the commentary I have read treats the first as bad news and the second as good news and leaves it there. That is not quite what is happening, and getting the framing right changes what you should do about it.

The cut is a deferral, not a loss

This is the single most important thing to understand, and it is the thing most owners get wrong when I explain it. A writing down allowance is not an annual cap on relief. It is a reducing-balance calculation applied to a pool of unrelieved expenditure. Whatever is left in the pool this year rolls into next year and gets written down again.

So cutting the rate from 18% to 14% does not delete any relief. The pool still empties. It just empties more slowly. Over the life of the asset the total deduction is exactly the same to the penny. What you have lost is the use of the money in the meantime — and for a business managing cash rather than managing a spreadsheet, that is a real cost, just a much smaller one than the headline suggests.

Understanding it as a timing difference rather than a tax rise is what stops you making the expensive mistake, which is rushing capital spend forward to beat a deadline that does not exist. The rate attaches to the chargeable period, not to the date you bought the asset. Buying a machine in March 2026 rather than May 2026 does not lock the pool at 18%. There is nothing to beat.

The worked example: a £180,000 main pool

Take an illustrative engineering company with a 31 March year end and a main rate pool carried forward of £180,000 at 1 April 2026. It buys nothing new, so this is purely the effect of the rate change on relief it has already earned. Corporation Tax at the 25% main rate.

Year to 31 March	WDA at 18%	WDA at 14%	Deduction lost	Extra tax at 25%
2027	£32,400	£25,200	£7,200	£1,800
2028	£26,568	£21,672	£4,896	£1,224
2029	£21,786	£18,638	£3,148	£787
Three-year total	£80,754	£65,510	£15,244	£3,811

So the company pays about £3,811 more Corporation Tax across three years than it would have done — and note the pattern, because it is the pattern that tells you what kind of problem this is. The gap is widest in year one and narrows every year after. That is the signature of a deferral working its way out, not of a permanent charge.

The £15,244 of deduction is not gone. It is sitting in the pool: after three years the 14% pool stands at £114,490 against £99,246 on the old rate, and the difference is £15,244 exactly. Every pound of it gets relieved in a later year.

Where it genuinely bites is the tail. Clearing 90% of that pool takes about 11.6 years at 18% and 15.3 years at 14%. Nearly four extra years for a pool to work through. If your business holds a long-lived pool — vehicles, workshop plant, fit-out that never qualified for a first-year allowance — the relief you are counting on in your longer-range forecast now arrives materially later than your last model assumed. That is a cashflow and budgeting correction, not a tax planning one.

If your year end isn't 31 March

Almost nobody's period lines up neatly with the change, so most businesses get a hybrid rate for one year, apportioned across the two parts of the chargeable period. The arithmetic is straightforward. A company with a 31 December 2026 year end has three months before 1 April 2026 and nine months after, so it gets roughly:

18% × 3/12 = 4.5%, plus 14% × 9/12 = 10.5%, giving a hybrid rate of about 15% for that one year, then 14% thereafter.

It is worth doing this before you file rather than after. A hybrid year that gets calculated at a flat 14% by mistake understates the claim, and it is the sort of error that quietly repeats itself into the following year's brought-forward figure.

The 40% first-year allowance, and who it is actually for

Now the other half. From 1 January 2026 there is a 40% first-year allowance on qualifying main rate plant and machinery. HMRC is clear about the intended audience: it will be most useful where the £1 million Annual Investment Allowance or the existing first-year allowances such as full expensing are unavailable or not preferred.

In plain terms, two groups gain most. Unincorporated businesses — sole traders and partnerships — cannot use full expensing at all, so the 40% allowance is the first meaningful first-year relief of its kind available to them. And leasing and hire businesses, which are generally shut out of the AIA on assets bought in order to lease them out, now have a first-year allowance where before they had a 14% pool and a long wait.

Three exclusions to know, because they will catch people out: second-hand assets, cars, and overseas leasing are all outside it. If your capital budget is mainly used vans and used machinery, this allowance does nothing for you.

Put figures on the leasing case, because the contrast is stark. An illustrative plant hire business buys £60,000 of new equipment to hire out, with the AIA unavailable to it. Under the old treatment the whole £60,000 went into the main pool and produced a 14% writing down allowance of £8,400 in year one. With the 40% first-year allowance it claims £24,000 in year one instead, with the £36,000 balance going into the pool to be written down afterwards. That is £15,600 more deduction in year one — worth £3,900 in tax at 25%, or £4,134 for a company caught in the 26.5% marginal relief band.

Notice the symmetry. The plant hire business gains £3,900 in year one from the new allowance while the engineering company with the old pool loses £1,800. The two changes were designed together, and which side of them you land on depends almost entirely on whether your capital spend is new and current or already sitting in a pool.

What has not changed

Worth stating plainly, because a change to one rate makes people nervous about all of them.

The Annual Investment Allowance stays at £1 million, and for the large majority of owner-managed businesses it still covers every pound of qualifying plant and machinery in the year it is bought. If that describes you, neither of these changes touches your new spending at all — though the writing down allowance cut may still touch your brought-forward pool, which is the bit people miss.

The special rate pool stays at 6%. HMRC's policy paper says so explicitly. That narrows the gap between the two pools from 12 percentage points to 8, so the main-versus-special split is a slightly less dramatic decision than it was, but it is still worth getting right on integral features and fit-out.

And the small pools allowance is unchanged: where either pool stands at £1,000 or less, you can write off the whole balance in one year instead of claiming a writing down allowance on it. With the main rate down to 14%, the case for using it the moment you are eligible is stronger than it was — a £950 pool at 14% takes an absurd number of years to disappear.

Cars, briefly, because the rate change reaches them

Cars cannot get the AIA, cannot get full expensing and are excluded from the new 40% allowance, so they live or die by writing down allowances — which makes them the group most exposed to this change. For cars bought since April 2021, gov.uk's guidance now sets it out as: zero-emission cars get a 100% first-year allowance, cars at 50g/km or less go in the main pool, and cars over 50g/km go in the special rate pool at 6%.

The main pool cars are the ones that just moved from 18% to 14%. The special rate cars are unaffected, having always been slow. If you run a fleet of any size, the pool arithmetic above applies to it directly.

Four things worth doing before your next year end

One: read your brought-forward main pool balance off last year's tax computation and multiply it by 4%. That is the deduction this change costs you in year one. Multiply it again by your Corporation Tax rate and you have the cash number. It takes two minutes and it turns a policy change into a figure you can plan around.

Two: list everything you have bought since 1 January 2026 that was refused the AIA or full expensing. Assets bought for leasing, and any capital spend beyond the £1 million AIA, are the obvious candidates. The new 40% allowance may now cover them, and it is a claim you have to make rather than one that arrives by itself.

Three: check whether either pool has dropped to £1,000 or less and use the small pools allowance to clear it. Small residual pools are the most commonly missed item on a limited company computation, and they get worse at 14%.

Four: stop trying to time capital spend around the rate. There is no deadline to beat, because the rate follows the period rather than the purchase. The only timing lever that genuinely works is getting expenditure out of the pool entirely by using the AIA, full expensing or the new 40% allowance — and that is a question about what you buy and how you buy it, not about which month you sign the order.

The honest summary

If your plant spend fits inside the £1 million AIA and you have no meaningful pool carried forward, neither of these changes will show up in your accounts and you can stop reading. If you carry a real main rate pool, your relief has slowed down by about four years on the tail and cost you a few thousand pounds of cash across the next three. And if you are unincorporated, or you buy assets to lease out, you have just been handed a first-year allowance you did not have in December.

The one group I would actively worry about is businesses whose forecasts were built on 18%. That is a modelling error rather than a tax error, and it is the sort that stays hidden until the year it matters.

If you want this checked against your own computation rather than an illustration, that is straightforward tax planning work and we do it as part of management accounts rather than as a separate exercise. Tell us what you have got and we will come back the same working day, or book a discovery call and bring last year's tax comp with you.