Capital allowances New First Year Allowance — Important Update for Rental Members
The recent UK Budget included a significant change that will be of interest to our rental members. From January 2026, equipment purchased for lease, which was previously excluded from capital allowances, will now qualify for a 40% First Year Allowance (FYA).
This follows sustained lobbying from across the industry to correct a long-standing inconsistency in the capital allowances system - with thanks to the Hire Association Europe (HAE), Construction Equipment Association (CEA), and Construction Plant-hire Association (CPA) for their collaboration.
What are capital allowances?
Capital allowances enable businesses to offset the cost of capital assets – such as plant and machinery – against taxable profits. This effectively replaces commercial depreciation, which is not permitted for tax purposes.
This new 40% FYA will be welcome news for rental companies investing in new plant and machinery, helping reduce tax liabilities at the point of purchase. More detail is expected in due course, but members may wish to familiarise themselves with the announcement here:
