What is First Year Allowance? UK Definition 2026/27
Quick Answer
100% tax relief in the year of purchase for qualifying business assets.
Definition of First Year Allowance
First Year Allowances (FYAs) provide 100% tax relief on qualifying expenditure in the year of purchase. Different FYAs apply to different assets: Annual Investment Allowance (£1 million), Full Expensing (for companies on main pool assets), and specific FYAs for zero-emission vehicles and energy-efficient equipment.
First Year Allowance — Key Facts for 2026/27
| AIA limit | £1 million |
| Full expensing | 100% for companies |
| Zero-emission cars | 100% FYA |
| Energy-efficient equipment | 100% FYA |
How First Year Allowance Works — Example
- 1Equipment purchase: £50,000
- 2Using AIA: 100% first year relief
- 3Tax saving (19% CT): £9,500
- 4Tax saving (25% CT): £12,500
- 5Cash flow benefit: Immediate tax reduction
How First Year Allowance Affects Your Tax
First Year Allowances provide significant cash flow benefits by allowing immediate tax relief. Planning major purchases around year-end can maximise the timing benefit of FYAs.
Official HMRC Guidance on First Year Allowance
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
HMRC: First Year AllowancesFrequently Asked Questions about First Year Allowance
Related Tax Terms
Annual Investment Allowance (AIA)
Tax relief allowing businesses to deduct 100% of qualifying equipment costs up to £1 million.
Capital Allowances
Tax relief on qualifying business assets like equipment, vehicles, and machinery.
Full Expensing
100% first-year tax relief for companies on qualifying plant and machinery.
Writing-Down Allowance
Annual capital allowance claiming a percentage of an asset pool each year.
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.