Home / Guides / Full Expensing and the Annual Investment Allowance
Last updated 23 October 2026. Written by the Limited Company Accountant UK team, part of Accotax. Figures are for the 2026/27 tax year; always check GOV.UK for the latest rates.
Short answer: Full expensing gives 100% first-year Corporation Tax relief on qualifying new plant and machinery, and the Annual Investment Allowance gives 100% relief on up to £1 million a year of qualifying spend. Both reduce your tax in the year you buy.
At a glance
| AIA limit | £1,000,000 a year |
|---|---|
| Full expensing | 100% relief on qualifying new main-rate plant and machinery |
| Cars | Special rules: only new zero-emission cars qualify for 100% relief |
How they differ
The AIA covers new and second-hand plant, up to the annual limit. Full expensing applies only to companies and mainly to new main-rate assets, with no cap. Cars are treated separately.
Example
A company with £120,000 profit buys a £20,000 computer system. The cost is deducted in full, cutting taxable profit to £100,000 and saving £5,000 of tax at 25%.
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Timing
Relief goes into the accounting period when the asset is bought, so buying before your year end can bring the saving forward.
The bottom line
Full expensing gives 100% first-year Corporation Tax relief on qualifying new plant and machinery, and the Annual Investment Allowance gives 100% relief on up to £1 million a year of qualifying spend. If you would rather not do it alone, our fixed fees start at £45.83 + VAT a month.
Frequently asked questions
What is the Annual Investment Allowance?
A 100% deduction for qualifying plant and machinery up to £1 million a year.
Can I claim full expensing on a car?
Cars have special rules, and only qualifying zero-emission cars may get 100% relief.
Do sole traders get full expensing?
No, it is only for companies.
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Our packages start at £45.83 + VAT and cover accounts, tax and deadlines. Get a free quote or call 0203 4411 258.
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