For accounting periods falling in 2025/26, the annual investment allowance is £1,000,000 per 12 months, giving 100% relief on qualifying plant and machinery in the year of purchase.[1] That is the same permanent level in force since it stopped being a temporary measure in April 2023, so there is no expiry date and no £200,000 reversion to plan around.

The allowance itself is the quiet part of the year. The rules around it are not: 2025 reclassified double cab pickups out of the AIA, 1 January 2026 brought a new 40% first-year allowance, and April 2026 cut the writing down allowance that catches anything the AIA does not cover. This page sets out the year-specific position with the dates and figures labelled.

The 2025/26 Position in Numbers

For the 2025/26 tax year (6 April 2025 to 5 April 2026) and for company accounting periods falling across it:

  • AIA limit: £1,000,000 per 12-month period, permanent. A 9-month period gets £750,000; an 18-month period must be split into two chargeable periods, each with its own scaled cap.
  • Relief rate: 100% of qualifying plant and machinery, new or second-hand.
  • Main-rate WDA on pooled spend: 18% for periods beginning before 1 April 2026 (CT) / 6 April 2026 (IT); 14% for periods beginning on or after those dates (FA 2026 s.28).[2]
  • Special rate pool: 6%, unchanged.
  • For history: the cap was £200,000 up to 31 December 2018 and £1m from 1 January 2019 onward, which is why searches for the 2018 or 2019 allowance return the lower figure. Nothing before 2019 is relevant to a current claim.

What qualifies, and the claiming mechanics generally, do not change year to year; they are covered in our AIA capital allowances claiming guide. For the quick one-screen version see the AIA at a glance.

What Changed for the AIA in 2025, and What Changes Next

Three dated changes bracket the 2025/26 year. None alters the £1m limit; all three alter what a claim looks like in practice.

From April 2025: double cab pickups are cars. For expenditure incurred from 1 April 2025 (corporation tax) or 6 April 2025 (income tax), a double cab pickup is treated as a car for capital allowances whatever its payload (HMRC CA23511). Cars never qualify for the AIA, so a double cab bought in 2025/26 gets writing down allowances by CO2 band instead. The transitional carve-out: a contract entered into before April 2025, with the expenditure incurred by 1 October 2025, keeps van treatment and full AIA. Ordinary vans, lorries and single cab pickups are unaffected and still qualify in full.

From 1 January 2026: the 40% first-year allowance. FA 2026 s.29 introduced a 40% FYA on new and unused main-rate plant (not cars, not second-hand), open to companies and unincorporated businesses.[3] Within the £1m cap the AIA at 100% always beats it, so its practical role is taking the next slice once the cap is exhausted. Which relief to lead with is a decision question, covered in annual investment allowance explained.

From April 2026: the main pool slows down. The main-rate WDA falls from 18% to 14% for periods beginning 1 April 2026 (CT) or 6 April 2026 (IT).[2] The AIA is untouched, but the fallback got worse: spend above the cap, spend on assets you chose not to claim on, and pre-existing pool balances all relieve more slowly. An AIA claim taken in 2025/26 is therefore worth relatively more than the same claim deferred.

Worked Example: A Year Ended 31 March 2026

An Exeter print business, accounting period 1 April 2025 to 31 March 2026, buys a new digital press for £48,000 and a second-hand guillotine for £9,000. Both qualify; total AIA claim £57,000. Profit before capital allowances is £180,000.

With the claim, taxable profit is £123,000. Corporation tax is 25% x £123,000 = £30,750, less marginal relief of 3/200 x (£250,000 - £123,000) = £1,905, giving £28,845. Without the claim, tax on £180,000 is 25% x £180,000 = £45,000 less 3/200 x £70,000 = £1,050, giving £43,950. The AIA saves £15,105, which is exactly 26.5% of the £57,000, because the whole deduction lands in the marginal-relief band.

Note the split: the new press could alternatively have used full expensing (companies only) with the same 100% result, but the second-hand guillotine could not; the AIA covers both without caring which is new.

Check if and when MTD applies to you

Skip the spreadsheet. Tell us about your situation and a specialist will review your position and the next sensible step, with no obligation.

Step 1 of 2, about you

Step 1 of 2, about you

Periods That Straddle April 2026

Two different rules, and only one of them needs arithmetic.

The AIA cap does not straddle. Because the £1m limit is the same on both sides of April 2026, a period running across the date has a plain £1m cap (scaled only for its length). The old-era exercise of blending two different caps across a change date died when the £1m became permanent.

The WDA rate does. A chargeable period already running at April 2026 uses a hybrid main-pool rate, time-apportioned between 18% and 14%. A company with a year ending 31 December 2026 has 3 months at 18% and 9 months at 14%: (3 x 18% + 9 x 14%) / 12 = 15% on the main pool for that year. So if the same company spent £1.2m on qualifying plant in that year, the first £1,000,000 gets 100% AIA and the £200,000 excess enters the main pool, attracting a WDA of £200,000 x 15% = £30,000 in year one, then 14% reducing balance thereafter. The full rate mechanics live in our writing down allowance rates guide.

Timing a Purchase Either Side of the Change Dates

For a purchase that the £1m AIA will cover, timing is tax-neutral on the relief rate: 100% is 100% in any period. What timing does move:

  • Which period's cap it consumes. Expenditure counts when the obligation to pay becomes unconditional, normally delivery. A Dundee haulier taking delivery of a £150,000 tractor unit on 30 March rather than 2 April moves the claim, and the cap it uses, a whole period.
  • The rate on any excess. Spend above the cap pooled in a period beginning before April 2026 starts writing down at 18%; the same excess in a later period starts at 14%. For very large programmes, earlier is better.
  • Double cab pickups. The April 2025 boundary has already passed, so for any new commitment in 2025/26 the vehicle is a car and timing cannot rescue the AIA; only the pre-April-2025 contract transitional route (expenditure by 1 October 2025) preserved it.
  • New plant above the cap from January 2026. Expenditure from 1 January 2026 on new main-rate plant can take the 40% FYA on the slice the AIA misses; the same spend committed in December 2025 could not.

If your year end and a big purchase are landing close together, we can model the period-by-period outcome before you order. Contact our team or see our services.

Sources

  1. Claim capital allowances: annual investment allowance. GOV.UK. gov.uk/capital-allowances/annual-investment-allowance. Retrieved 2026-08-25.
  2. Finance Act 2026, section 28 (writing down allowance main rate reduced to 14%). legislation.gov.uk. legislation.gov.uk/ukpga/2026/11/section/28. Retrieved 2026-08-25.
  3. Finance Act 2026, section 29 (40% first-year allowance). legislation.gov.uk. legislation.gov.uk/ukpga/2026/11/section/29. Retrieved 2026-08-25.
  4. CA23511: plant and machinery allowances, cars, double cab pickups. HMRC Capital Allowances Manual. gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23511. Retrieved 2026-08-25.