Blog Archives - Page 24 of 83 - Clemence Hoar Cummings

Capital allowances allow businesses to claim tax relief on money invested in assets like machinery, equipment, or certain vehicles used commercially.

There are a variety of capital allowances available, including:

Full Expensing
Annual Investment Allowance (AIA)
Writing-Down Allowances (WDA)

The allowance that your business is eligible for depends on what you buy, how much you invest, and how your business is structured.

Full Expensing

Full Expensing allows companies to deduct 100 per cent of the cost of qualifying plant and machinery assets from taxable profits in the year of purchase.

This applies to new assets only and is available to limited companies subject to Corporation Tax.

It is an ideal option if you are looking for immediate relief or using the investment to improve cash flow.

Annual Investment Allowance

The AIA offers a similar benefit but is more widely available to sole traders, partnerships, and limited companies.

This allowance allows for 100 per cent relief on qualifying expenditure up to £1 million per year.

Unlike Full Expensing, AIA can apply to both new and used assets, though exclusions can apply to assets such as leased items.

Writing-Down Allowances

WDAs apply to any expenditure that exceeds the AIA threshold or when assets are not eligible for Full Expensing or the AIA.

These allowances offer tax relief spread over several years, typically at a rate of relief against profits of 18 per cent for main pool items and six per cent for special rate pool items, like integral features or solar panels.

How to claim capital allowances

Capital allowances must be claimed within your tax return and can be set against your business’s taxable profits. Eligible items must be used in your business, not for personal use.

There are additional schemes, such as Enhanced Capital Allowances, which can be used for “eco” investments, which may also be useful to certain businesses.

For a full list of qualifying items and further guidance on how to claim, please visit gov.uk/capital-allowances or speak to your tax adviser.

If you would like to know more about the capital allowances available to your business, please get in touch.

Making Tax Digital (MTD) is the Government’s initiative designed to streamline and digitise tax reporting in the UK.

While the MTD scheme has been in force for the past few years, changes are approaching, particularly for sole traders, self-employed individuals, and landlords.

Below, we outline clearly what MTD is, who it affects, the upcoming changes, and the steps you need to take to prepare.

For more in-depth information, please see our full Making Tax Digital guide or view our MTD roadmap infographic.

What is Making Tax Digital

MTD is intended to modernise the tax system by requiring digital record-keeping and regular digital submissions.

It is designed to increase accuracy, improve efficiency, and give taxpayers clearer visibility of their tax position throughout the year.

When do the MTD changes start?

The next phase of MTD (MTD for Income Tax Self-Assessment (ITSA)) comes into effect from April 2026 and will impact:

Sole traders
Self-employed individuals
Landlords

You will be affected if your income from self-employment or property exceeds £50,000 per year.

This threshold will reduce to £30,000 from April 2027, and as announced in this year’s Spring Statement, the threshold will drop again to £20,000 in April 2028.

HM Revenue & Customs (HMRC) will begin notifying those affected from April 2025 based on your 2023-24 Self-Assessment return.

What exactly is changing?

Under MTD for ITSA, from April 2026, you will need to:

Keep digital records of your income and expenses
Submit quarterly updates to HMRC using approved MTD-compatible software
Complete an end-of-period statement (EOPS) and submit a final declaration annually

This new process means tax information is updated more regularly, enabling better management of your tax obligations throughout the year.

How to prepare for Making Tax Digital

Here is what you can do now to ensure a smooth transition:

Check if you are affected

Determine if your income from self-employment or property exceeds £50,000 per year.

HMRC will be contacting affected taxpayers from April, but it is beneficial to understand your position early.

Choose appropriate software

You must use MTD-compatible software to maintain digital records and submit quarterly updates. If you need advice or assistance choosing the right software, we can help.

Decide when to sign up

HMRC offers two sign-up options:

Early sign-up (2025-26 tax year) – This allows you additional time to adjust, along with access to HMRC’s specialist support.
Standard sign-up (2026-27 tax year) – You can wait until April 2026 to comply.

Explore exemptions

Some individuals may qualify for exemptions due to age, disability, or lack of access to digital tools.

If you believe an exemption may apply to you, we can assist in assessing eligibility and applying on your behalf.

How we can help

Our expert team is here to support you throughout your transition to Making Tax Digital. We offer personalised help to:

Establish compliant digital record-keeping practices.
Select and integrate suitable MTD-compatible accounting software.
Provide ongoing guidance and ensure your quarterly submissions are accurate and hassle-free.

Act early and avoid the stress

The rules may not take effect until April 2026, but starting your preparation now can reduce stress and ensure you are confidently ready for the transition.

Contact us today for help and assistance with anything related to MTD and discover how we can make sure you are prepared for the changes.

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