2025 has been a challenging year for Travel, Sport and Leisure businesses and this is set to continue into 2026 following the Chancellors recent budget announcement. The latest budget changes have added further strain, however there are ways to ease these.
There are many tax reliefs available that can minimise tax exposure and ease cash flow. One of the most impactful of these reliefs is Capital Allowances. Included in the chancellor’s recent announcement is the introduction of a new first year allowance of 40% for leasing equipment, which was previously blocked for capital allowances.
This may help businesses with high volumes of leased equipment obtain relief and therefore improving cashflow. Undertaking a capital allowance review therefore may be a valuable way to ensure businesses are enhancing there cashflow benefit.
Capital Allowances
Capital allowances (CAs) are a vital form of tax relief that enable businesses to deduct qualifying capital expenditure from their taxable profits. This mechanism helps reduce immediate tax exposure and improves cash flow.
There are different versions of CAs and for some the rate of relief is more attractive than others. The below table summarises the main tax reliefs available on this expenditure:
| Main rate – Plant & Machinery | Special Rate – Integral features | Structural Buildings allowances | |
| Rate of relief | 18% writing down basis (1) | 6% writing down basis | 3% straight line |
| Scope for 100% relief? | See below re. AIA and full expensing | N/a | |
- Plant and machinery rate of relief to be reduced from 18% to 14% from April 2026
Undertaking a capital allowance review is essential to ensure that all qualifying expenditure is correctly identified and allocated to the appropriate tax pools (summarised above), maximising the available relief.
How can relief be accelerated up to 100% of the cost in the year of incurring?
As mentioned in the above table, some of the rates of relief can be relatively slow, so businesses should look to any allowances that may accelerate relief to 100%. The potential options are set out below:
| Rate of relief | Threshold | Eligible Businesses | Restrictions / Information | |
| Annual Investment Allowance (‘AIA’) | 100% | £1m shared between group and connected companies. | Available to most businesses, including sole traders, partnerships, and companies | Not eligible for cars or assets acquired from connected companies. |
| Main rate first year allowance – Plant and machinery (Full expensing) | 100% | No threshold | Only available to companies subject to UK corporation tax | Assets must be new and unused and not acquired via finance lease or subsequently leased out. |
| Special rate first year allowance – Integral features | 50% | |||
| First year allowances – Leasing (introduced from 1st January 2026) | 40% | No threshold | Available to most businesses, including sole traders, partnerships, and companies | This relief applies to businesses caught by leasing restrictions such as relevant for operators using leased equipment, like many gyms and leisure companies. |
Given businesses in this sector undertake capital spending consistently through the lifecycle, being able to claim tax relief on the expenditure as early as possible will help reduce immediate corporation tax liabilities and ease cash flow pressures.
We would always recommend that the above allowances are considered in conjunction with the claim specific to the business needs, to ensure that tax relief is being taken at the appropriate time.
Other ways which you could maximise your cashflow:
Management accounts & outsourcing
Menzies provides high-quality financial reporting to support informed management decisions. Accurate and timely management accounts enable businesses to review cash flow and expenditure with confidence, ensuring greater oversight and improved strategic decision-making.
Business structure
Our team can assess your current business structure and advise on restructuring opportunities to maximise tax efficiency. This may include strategies for optimising loss relief, improving profit extraction, and enhancing overall financial performance.
Employment incentives
We can offer expert guidance on implementing employee share schemes, designed to increase staff engagement and retention while delivering corporation tax relief for your business. These schemes can create a stronger alignment between employee performance and company success, and is an alternative way to incentivise staff in the light of increasing wage bill costs.
How can Menzies help businesses? If you’re considering any of the above, get in touch with our experts to maximise your tax reliefs and strengthen your cashflow strategy
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