Budget 2026: let tax timing inform an investment decision, not lead it

Consider a board that needs a new production line and could make the purchase in December or January. That is when the Budget's proposed capital-allowance changes become relevant. They should influence the timing calculation, not replace the investment decision.

Budget 2026, published on 28 October, proposes a 50% main-rate first-year allowance for qualifying expenditure from 1 January 2027. It also proposes reducing the main writing-down allowance to 12%, with the corporation tax change taking effect from 1 April 2027. The government says full expensing will remain. The measures require the relevant legislation, and eligibility depends on the company and the assets.

I would start by separating three dates: when the equipment must be available for operations, when the company pays for it and when any tax relief affects the tax liability. They do not necessarily fall in the same period.

A delayed purchase might improve short-term cash headroom but cause lost output or higher running costs. An earlier purchase might support delivery yet create a low point in the cash forecast. The board should understand both before treating the tax position as decisive.

The practical test is to run the investment case on each realistic date, including finance costs, working capital and operational risks. Have a tax adviser confirm the applicable relief rather than applying a headline percentage to the entire purchase.

My preference would be to approve the investment for its commercial return and then choose the most sensible timing. If the tax treatment is the only reason it appears attractive, the underlying case needs another look.

Further reading

• Strategic advisory
• HM Treasury: Budget 2026