Two dentists buy the same £60,000 of equipment. One signs the order in the last week of March, the other in the first week of April. They pay the same price for the same kit, but one gets the tax relief a full year before the other. The difference is not what they bought, it is when. This guide is about that second question: the timing of the Annual Investment Allowance, and how the date you commit to a purchase decides which tax year the relief lands in.

This is not a general explainer of what the Annual Investment Allowance is or what equipment qualifies. For that, read our guide to how capital allowances and the AIA work for dental practices, which covers the basics and the qualifying-equipment list. This page assumes you know what AIA is and focuses entirely on the planning angle: incurred dates, short and straddling periods, and the accelerate-or-defer decision around your year-end.

The same purchase, a year apart in relief

Capital allowances are given in the accounting period in which the expenditure is incurred. The Annual Investment Allowance gives 100% relief on qualifying plant and machinery up to £1 million in that period. So the period in which a purchase is incurred is the period that gets the relief.

For a practice with a 31 March year-end, an order incurred on 28 March 2027 relieves in the 2026/27 year; the same order incurred on 6 April 2027 relieves in 2027/28. One week of difference, one tax year of difference in relief. If those two years carry different profit levels or different marginal rates, the timing decides not just when you save tax but how much. The whole of this article turns on controlling that incurred date.

When expenditure is incurred: the rule that drives timing

The lever is the incurred date, and it is not the date you pay. For capital allowances, expenditure is generally incurred on the date you become unconditionally obliged to pay it, which is broadly the date of the contract or delivery. There is one important refinement: if payment is due more than four months after the obligation arises, the expenditure is treated as incurred on the payment-due date instead.

So a chair contracted and delivered on 28 March, with payment due within four months, is incurred on 28 March, regardless of when the invoice is actually settled. The same chair contracted on 28 March but with payment not due until, say, the following September (more than four months later) would be incurred in September. This four-month rule is the detail the whole planning exercise depends on, because it is what lets you, within limits, place the incurred date on the side of the year-end you want. The rule sits in CAA 2001 s.5.

Hire purchase and the incurred date

Hire purchase has its own timing rule that often works in the dentist's favour. Under HP the asset is treated as bought, and the full cash price treated as incurred, when it is brought into use, even though most of the instalments are still unpaid. So if you complete an HP agreement and put the equipment into use before your year-end, the whole cash price falls into this year's AIA, even though you have paid only a deposit and one or two instalments.

That is a powerful timing tool: a large piece of equipment financed on HP, commissioned and in use before the period-end, pulls its entire cash price into this year's relief on a small initial cash outlay. The finance interest is handled separately as a revenue deduction over the term, it is not part of the capital allowances figure. The mechanics of buying versus financing equipment, and how each route maps to allowances, sit alongside this page in the cluster on equipment finance.

The £1m AIA is a per-period allowance: use it or lose it

The £1 million AIA is granted per accounting period and does not carry forward. Each period starts with a fresh £1 million; whatever is unused at the end is gone. There is no rollover of an unused balance into the next year.

This creates a wasting-AIA trap on both sides. On one side, a high-profit year in which you spend nothing wastes that year's allowance, you cannot save it for a bigger spend later. On the other side, bunching a large spend into a single year can push the total over the £1 million cap, so the excess spills into the slower pool instead of getting 100% relief. Good timing is about neither under-using nor over-bunching: spending enough in the right years to use the allowance, without overflowing a single period's cap.

It helps to separate two things that sound similar. Unused AIA is not the same as a tax loss. A loss made in a year can usually be carried forward and set against future profits, so it is not necessarily lost value. Unused AIA, by contrast, simply expires at the period-end with nothing carried over, so the planning instinct to leave headroom unused does not apply to AIA the way it might to other reliefs. That is precisely why the year in which qualifying spend is incurred is worth managing deliberately rather than leaving to chance.

Short accounting periods prorate the AIA

The £1 million is the figure for a 12-month period. A period shorter than 12 months scales it down pro rata. A nine-month period gives nine twelfths of £1 million, which is £750,000. A six-month period gives £500,000, and so on.

This matters whenever you have a short period: on incorporation, when you change your year-end, or in a first or final trading period. A dentist who shortens the accounting period to nine months and then spends as if the full £1 million were available will over-claim. Always prorate the cap to the actual length of the period before deciding how much spend it can absorb at 100%. The proration rule is in CAA 2001 s.51A.

Straddling the AIA: periods that span a rate or limit change

Where an accounting period spans a change in the AIA limit, or a change in the writing-down rate, the allowance or rate is apportioned by time across the period. The currently live example is the main-rate writing-down allowance, which falls from 18% to 14% from 1 April 2026 for corporation tax and 6 April 2026 for income tax (FA 2026 s.28). A chargeable or basis period straddling that date does not use a single rate, it uses a hybrid, time-apportioned rate across the period.

The general principle is day-apportionment: the period is split at the change date and each part is treated under its own rule, with a cap in some cases on how much of the spend gets the more favourable treatment. The planning point is that, in a straddling period, when within the period you incur the spend can affect the relief, particularly for spend above the AIA cap that lands in the pool at 18% before the change or 14% after. This is the same 14% step that bears on the pool-split decision elsewhere in the cluster.

Accelerate or defer? Matching relief to your profit

This is the core of the planning. The question is never simply do I want relief, it is in which year is the relief worth more. Two levers:

  • Accelerate (buy and incur before year-end) when this year's profits are high, when this year's marginal rate is higher than next year's, or when you have AIA this year that would otherwise be wasted. Pulling the spend into this year cashes the relief sooner and, often, at a higher rate.
  • Defer (incur after year-end) when next year's profits or marginal rate will be higher, or when this year is a loss or low-profit year where the relief is worth little. Pushing the spend into next year lands it where it saves more tax.

Two 2026 changes sharpen the calculus. The dividend ordinary and upper rates rise from 6 April 2026 (8.75% to 10.75% and 33.75% to 35.75%), which shifts the value of relief between years for an incorporated practice extracting profit. And the 18% to 14% writing-down step makes above-AIA spend more valuable relieved sooner. Neither changes AIA itself, but both feed the accelerate-versus-defer decision.

Do not create or waste a loss

Claiming the maximum AIA is not always right. In a low-profit year, full AIA can wipe out the small profit and even create a loss. That loss has to be relieved somehow (carried back, set against other income, or carried forward), and it is often relieved at a low value, whereas the same spend in a profitable year would have saved tax at your marginal rate.

The release valve is that AIA is a maximum, not a mandate. You can claim less than the full amount, or none, and leave the expenditure in the pool to be written down over future years. In a loss or low-profit year, claiming partial AIA (or none) and writing the balance down at 14% can preserve more relief for the profitable years ahead. The right answer comes from modelling the relief in each scenario, not from reflexively claiming the maximum.

Bunching versus spreading across two periods

For spend above £1 million, how you phase it across periods can change the total relief. A £1.4 million fit-out done in one accounting period gets £1 million of AIA and £400,000 into the main pool, where it is written down slowly (14% of £400,000 is £56,000 of relief in the first year on the excess). Split the same £1.4 million so that £700,000 is incurred in the period ending 31 March 2027 and £700,000 in the period ending 31 March 2028, and each tranche sits inside a fresh £1 million AIA, so the whole £1.4 million gets 100% relief.

The catch is that the split must be genuine: the expenditure has to be actually incurred in the respective periods (using the incurred-date and HP rules above), not merely invoiced to look spread. Where a large project can legitimately be phased across a year-end, doing so can be worth far more than completing it all at once.

Companies: full expensing and the 40% FYA reduce the timing pressure

For a company, the £1 million cap bites less than it does for an unincorporated practice. Full expensing gives 100% relief on new main-rate plant with no cap (and 50% on new special-rate plant), and a new 40% first-year allowance applies from 1 January 2026 to both companies and unincorporated businesses on new main-rate plant. So a company buying new equipment is not constrained by the £1 million ceiling in the way a sole trader is.

But the period of incurral still governs the year of relief. Full expensing and the 40% FYA change how much relief a given spend attracts and whether the cap binds, not which year it lands in. The year-end timing question survives: even with the cap lifted, the incurred date still decides the year. For companies weighing new versus second-hand and the cap, our guide to full expensing for dentists covers the company-side reliefs in full.

How the timing works on the numbers: four worked examples

These show the mechanics. They are tagged to our locked house position on capital allowances (§7), use the £1 million AIA and the current rates, and are illustrations rather than advice on a specific purchase.

Example A: one week either side of the year-end

A practice with a 31 March year-end plans a £60,000 equipment order. If it is contracted and delivered on 28 March 2027, with payment due within four months, the £60,000 is incurred in 2026/27 and the AIA cuts that year's tax. If instead it is delivered on 6 April 2027, the relief slips into 2027/28. If 2026/27 is the higher-profit year, or carries the higher marginal rate, accelerating the order into late March saves tax a year earlier and at the better rate. Same kit, same price, one week apart, one tax year of difference in relief. (Tagged 2026/27 versus 2027/28, §7.)

Example B: short-period proration after a year-end change

A practice shortens its accounting period to nine months on incorporation. The AIA for that period is nine twelfths of £1 million, which is £750,000, not £1 million. A £900,000 fit-out in that nine-month period exceeds the prorated cap by £150,000, and that £150,000 goes into the pool at 14% rather than getting 100% relief. Phasing £150,000 of the spend into the next full-year period, which has a fresh £1 million allowance, would have kept the whole project inside AIA. The error here is treating the £1 million as fixed when the short period has scaled it down. (Tagged nine-month period, 2026/27, §7.)

Example C: phasing a £1.4m fit-out across two periods

A practice plans £1.4 million of equipment. Done in a single period, it gets £1 million of AIA and £400,000 into the main pool, where the first-year writing-down allowance at 14% gives £56,000 of relief on the excess, with the rest written down slowly over later years. Split instead so that £700,000 is incurred in the period ending 31 March 2027 and £700,000 in the period ending 31 March 2028, and each £700,000 tranche sits inside its own fresh £1 million AIA, so the full £1.4 million gets 100% relief. The phasing has to be real, the spend genuinely incurred in each period, but where it can be, it converts slow pool relief into immediate AIA on the whole amount. (Tagged 2026/27 plus 2027/28, §7.)

Example D: not claiming full AIA in a loss year

A practice has a low-profit year and buys £40,000 of new equipment. Claiming the full £40,000 AIA wipes out the small profit and leaves relief that is worth little in that year. Because AIA is a maximum and not a mandate, the practice can instead claim partial AIA, or none, and leave the £40,000 in the pool to be written down at 14% against the profitable years ahead, where the relief is worth more at the marginal rate. The lesson is that the maximum claim is not always the best claim. (Tagged 2026/27, §7.)

The practical year-end checklist

When a large equipment purchase is in prospect near a year-end, work through this:

  • Compare the years. What are this year's and next year's expected profits and marginal rates? Which year is the relief worth more in?
  • Confirm the incurred date. Check the contract date, delivery date and payment terms, and apply the four-month rule. For HP, check the brought-into-use date.
  • Check the period. Is it a short period (prorate the £1 million) or one that straddles a rate change (hybrid rate)?
  • Decide accelerate, defer or phase. Pull the spend forward, push it back, or split it across two periods, based on the comparison above.
  • Document the decision. Record the reasoning and the dates, so the claim stands up and the timing is defensible.

How this plays out in practice

A practice was planning a £900,000 refit in a shortened accounting period after incorporating partway through the year. The owner assumed the full £1 million AIA was available and that the whole £900,000 would get 100% relief. It would not: the nine-month period prorated the allowance to £750,000, so £150,000 of the spend would have dropped into the pool and been written down slowly rather than relieved in full. We showed the prorated cap and phased part of the spend into the next full-year period, where a fresh £1 million allowance was available, so the whole project ended up inside AIA and got 100% relief. The change was entirely in the timing, the practice bought exactly what it had planned to buy.

Common errors

  • Assuming the payment date governs. It is usually the obligation or in-use date that fixes the incurred date, not when you pay.
  • Leaving AIA unused in a high-profit year. Unused AIA does not carry forward, a high-profit year with no qualifying spend wastes the allowance.
  • Bunching spend over the £1 million cap. The excess drops into the pool at the writing-down rate instead of getting 100% relief.
  • Over-claiming AIA in a short period. The £1 million is prorated, claiming the full figure in a nine-month period over-claims.
  • Claiming full AIA in a loss year. AIA is optional; full relief in a loss year can waste it when it would be worth more carried in the pool.
  • Ignoring the 18% to 14% step. For above-AIA spend, the falling writing-down rate changes the value of relieving sooner versus later.

Where timing fits in the wider capital-allowances picture

AIA timing is the planning capstone of the wider capital-allowances decision. The allowance you are timing is the same one a fit-out directs at the special-rate pool, the same one a hire-purchase deal feeds, and the same one a buyer picks up after a practice purchase. Whether you accelerate, defer or phase a purchase comes down to matching the relief to the year it is worth most, controlling the incurred date, and respecting the short-period and straddling rules. For the numbers worked through end to end, our worked capital-allowances example for a dental practice shows the figures in context. A short conversation before a large purchase, rather than after, is usually where the timing value is captured.