With the Spring Forecast set for March 26, 2025, commercial property owners and investors should prepare for potential shifts in capital allowances and tax relief policies. The Chancellor’s statement will outline the UK’s fiscal outlook, and with a general election on the horizon, it could signal major tax policy changes.
HMA Tax has been closely monitoring government signals, economic conditions, and industry trends to assess what may be on the table. Read on as we explore likely Capital Allowance reforms, their impact on commercial property owners, and how to prepare before the announcement.
Will Full Expensing Be Extended or Adjusted?
Full expensing, introduced in 2023, has been a game-changer for businesses investing in plant and machinery. It allows 100% tax relief on qualifying expenditure, replacing the former super-deduction scheme.
However, the policy is not permanent and is set to expire in 2026 unless extended. The Spring Forecast could bring:
- A confirmation of full expensing as a long-term tax policy (a move favoured by businesses).
- A tapering or reduction in relief due to fiscal tightening; or
- A modification of eligibility criteria, potentially limiting claims in certain sectors.
If full expensing is scaled back, businesses should accelerate planned investments before changes take effect, which we don’t expect till 2026 at the earliest.
2. Changes to the Annual Investment Allowance (AIA)
The Annual Investment Allowance (AIA) currently provides 100% relief on qualifying plant and machinery purchases up to £1 million. While this was made permanent in 2023, speculation remains about whether:
- The government will increase the AIA limit to stimulate economic growth
- AIA rules will be simplified to encourage more businesses to claim
- The government could restrict eligibility to cut costs
If changes are expected, businesses should review their investment plans to maximize relief under current rules.
3. Potential Adjustments to Capital Allowances for Commercial Property Owners
There has been ongoing debate around capital allowances for property improvements. The Spring Forecast may address:
- New incentives for energy-efficient upgrades (e.g. heat pumps, insulation, and solar panels)
- Restrictions on certain allowances to reduce government expenditure; or
- A rebalancing of tax reliefs between landlords and owner-occupiers
If green incentives are introduced, businesses should explore how they align with the governments ESG (Environmental, Social, Governance) goals to maximise both financial and sustainability benefits.
Will We See More Support for UK Manufacturers and Industrial Sites?
The government has emphasized supporting UK manufacturing, which could mean:
- Enhanced capital allowances for industrial property investments
- New allowances for R&D-heavy industries
- Additional tax incentives for automation, robotics, and AI-powered production
Manufacturers should prepare to leverage any new capital allowances by assessing upcoming investment plans.
What Property Owners Can Do Now
Ahead of the Spring Forecast, commercial property owners should consider:
- Review capital expenditure plans – Some reliefs may change, so strategic spending before any legislative changes could be beneficial.
- Speak to a tax specialist – Early insights from industry experts (like HMA Tax) can help businesses make informed decisions, contact a Claims Specialist today.
- Prepare for legislative updates – Keep an eye on government statements and our website so you are ready to act on any new policies.
We eagerly await this budget and look forward to providing our analysis in the coming days.
