Spring Budget 2024: Changes to Capital Allowances

The changes we have found so far…

Furnished Holiday Lets (FHL)

The Furnished Holiday Regime is to be abolished from 6 April 2025. In the Spring Budget 2024, the Chancellor announced a policy which is aimed at supporting people to live in their local area. This will be carried out by treating short-term and long-term lets in the same way for tax purposes. FHL and non-FHL properties will no longer need to separately calculate and report income.

As it stands, if you let properties that qualify as FHLs, you’re entitled to plant and machinery capital allowances for items such as furniture, equipment and fixtures. This, among other benefits included in the regime, will cease from 6th April 2025.

We await details of how this change will be applied to existing pools of Capital Allowances relating to FHL expenditure.

Full Expensing (FE)

• Full Expensing came as a replacement for super-deduction. Which was announced in the Budget 12 months ago and came into effect from 1 April 2023. It is only eligible to companies and allows taxpayers to claim 100% of the cost of qualifying main/general pool expenditure from their profit.
• Along similar lines to Annual Investment Allowance but with no upper limit. It allows companies to deduct the 100% cost against profits in the tax return for the financial period of expenditure.
• It is claimable in respect of expenditure qualifying as the main pool only, examples of which are vans and lorries. As well as laptops, IT equipment, sanitaryware, and office furniture. This can include desks and chairs (50% First Year Allowance applies to Special Rate pool qualifying expenditure).
• If a company is paying the new tax rate of 25%, this will result in a saving of 25p for every £1 spent. Or, 19p for every £1 spent for companies with profits under £50,000.
• It was later announced in the Autumn Statement in 2023 that Full Expensing would become a permanent allowance.
• Following the most recent Spring Budget announcement, there has been a further development in this relatively new Allowance. The Chancellor is proposing to extend Full Expensing to assets for leasing. The draft legislation on an extension of Full Expensing to assets for leasing will be published shortly. We are told that this extension will be put in place when fiscal conditions allow.

Freeport tax reliefs

• Currently, enhanced structures and building allowances are available to firms constructing and/or renovating non-residential structures and buildings within a Freeport tax site. This allowance is based on the standard structures and buildings allowance. But provides a higher rate of relief of 10%, compared to the existing national rate of 3%.
• Capital allowances are also available for companies investing in qualifying new plant and machinery assets. This allowance is a 100% enhanced capital allowance for plant or machinery primarily for use in a Freeport tax site.
• The Spring Budget has provided an update on this relief. The anticipated end date on these tax reliefs has been extended from five to ten years, until September 2031 in England, and September 2034 in Scotland and Wales.