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By Mark Skellum, Partner & CFO
The main rate writing down allowance fell from 18% to 14% on 1 April 2026, and the new 40% first year allowance introduced on 1 January is restricted to plant that is unused and not second hand. So deferring a replacement, or buying used rather than new, now attracts slower tax relief than the same decision would have done last year. The cash saved on the purchase is real. The tax position underneath it has moved.
That matters more this year than last, because the sector has visibly stopped buying. New HGV registrations fell 14.7% in the second quarter of 2026, with 8,687 trucks joining UK roads, taking first half demand down 8.9% to 18,158 units. The SMMT puts it down to a market softening after three strong years of renewal, which is fair as far as it goes. What the registration figures do not show is the reasoning inside each fleet. In most of the conversations I have had this year, the decision was not strategic. It was a decision to hold on for another twelve months and see how the year lands, taken by operators whose costs excluding fuel rose 5.91% on the RHA's last cost movement survey and who are working on margins that leave very little room for a wrong call.
What changed, and when?
Two measures in Finance Act 2026 did the work. Section 28 substitutes 14% for 18% as the main pool writing down allowance, effective for chargeable periods beginning on or after 1 April 2026 for corporation tax and 6 April 2026 for income tax. Periods straddling those dates get a blended rate worked out on the proportion of days falling either side of the change, so a company with a December year end runs at about 15% this year before dropping to 14%.
Section 29 inserts a new section 45U into the Capital Allowances Act 2001, giving a permanent 40% first year allowance on main rate expenditure incurred on or after 1 January 2026. It is deliberately wider than full expensing in two respects: unincorporated businesses can claim it, and so can businesses buying plant in order to lease it out. It is narrower in one respect that matters a great deal in haulage. The plant must be unused and not second hand.
Everything else holds. Companies buying new trucks outright still get full expensing at 100%. The annual investment allowance stays at £1m and still covers second hand assets. The special rate pool is untouched at 6%. And HMRC's own impact note puts the net Exchequer effect of the package at around £1bn in 2026/27, rising to about £1.5bn the following year. The 40% allowance is the sweetener. The 14% rate is the bill.
"The 40% allowance is the sweetener. The 14% rate is the bill."
Does the annual investment allowance make this academic?
For a good part of the sector, yes. A haulier replacing two or three units a year, with modest trailer and workshop spend alongside, will not come close to the £1m ceiling, and the annual investment allowance does not distinguish between a new vehicle and a used one. That operator can largely set the change aside.
A fleet of thirty or more on a rolling five to seven year cycle is in a different position. Replace six or seven tractor units in a year, add trailers, add a refit, add anything meaningful at the depot, and the allowance is gone by the autumn. Above that line, the route taken starts to matter a great deal:
- New, bought outright by a company goes to full expensing, and the whole cost is relieved in year one.
- New, bought by a partnership or by a leasing business goes to the new 40% allowance, with the balance written down afterwards.
- Second hand gets no first year relief at all and joins the main pool at 14%, which takes about fifteen years to relieve 90% of the cost, against about twelve at the old rate.
A used unit at half the price of a new one still looks cheaper on the invoice. On a post-tax basis the gap is narrower than the invoice suggests, and it narrowed again in April.
The disposal charge that catches people out
Full expensing has a sting on the way out that gets overlooked, and it is the reason deferral can cost more than the arithmetic above suggests. Under section 59A of the Capital Allowances Act, disposing of an asset on which full expensing was claimed brings an immediate balancing charge equal to the whole of the disposal value. It does not drop into the pool and quietly reduce future allowances. It lands as taxable profit in the year of sale.
On a steady replacement programme that mostly nets out, because the charge on the units going out is absorbed by the deduction on the units coming in. Stop the cycle and it stops netting. Sell four trucks this year and buy nothing, and the proceeds are taxable with nothing set against them, which is an odd outcome for a business that has just decided to conserve cash. It usually surfaces at the year end, by which point the transactions are done.
Worth knowing that the new 40% allowance does not carry an equivalent charge. Finance Act 2026 created no free-standing balancing charge for it, so disposals of assets that attracted it follow the ordinary pooling rules. Two reliefs, two very different disposal profiles, and a good reason to treat planned disposals as their own line rather than assuming they cancel out against planned purchases.
Has contract hire quietly become better value?
This is the question I would be putting to a lessor this year. Until January, a business buying trucks in order to hire them out was locked out of full expensing and left writing the cost down over years. From 1 January that same business claims 40% in year one on new vehicles. Its post-tax cost of ownership improved on the same day, on a fleet it was going to buy anyway.
Whether any of that reaches the rental rate is a matter of competition and negotiation, and no lessor is going to volunteer it. But a contract hire quote written last autumn was priced under a different tax regime to one written now, and an operator renewing an agreement this year has a fair question to put. The same logic applies to depot infrastructure, where section 30 of the Act extended the 100% first year allowance on electric vehicle charge points by a further year, to 31 March 2027 for corporation tax purposes. That will be a minority concern for now, given zero emission trucks accounted for 90 units and 1.0% of registrations in the second quarter, but for anyone with a charging project already moving, the deadline is now visible.
None of this argues for buying trucks you do not need
I would rather see a well-maintained unit run an extra two years than see a fleet buy metal to chase a deduction. Relief worth 25p in the pound does not turn an unnecessary purchase into a good one, and there is enough capital tied up in this sector already. Tax should follow the operational decision rather than lead it.
The more common mistake runs the other way. Replacement models get built on price, residual value, maintenance cost and finance rate, with tax treated as a constant that washes out whichever way the decision goes. Since January it has not been a constant. The gap between buying new and doing anything else has widened, relief on everything sitting in the main pool has slowed, and the timing of disposals now carries a tax consequence of its own.
The practical step is not complicated. Take the replacement plan for the next two years, split it between new and used, check where the year end falls against the April change and what blended rate applies, and put the planned disposals in as a separate line rather than assuming they wash through. Most of the time the answer will not change the plan. Occasionally it will change the order things happen in, and the order is worth a surprising amount.
If you are working through a replacement programme this year and want to test how the numbers fall, the haulage and logistics team can talk it through with you.
This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated with us.
Sources
Finance Act 2026, sections 28, 29 and 30 (legislation.gov.uk). HMRC tax information and impact note, New first-year allowance and main rate of writing-down allowances (GOV.UK, 26 November 2025). HMRC Capital Allowances Manual CA23220. Capital Allowances Act 2001, sections 45U, 56 and 59A. SMMT HGV registration figures for the second quarter of 2026. RHA Annual Cost Movement Survey 2025.
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