Full expensing is a capital allowance that lets limited companies deduct the full cost of qualifying plant and machinery from their profits before tax in the year the asset is bought [1]. For UK dentists operating through a limited company, this can mean significant tax savings on new dental chairs, X-ray machines, and other equipment. This guide explains how full expensing works, what qualifies, and how to claim.
What is Full Expensing?
Full expensing is a 100% first-year capital allowance introduced for companies from 1 April 2023 [1][3]. It allows you to write off the entire cost of new, unused plant and machinery against your taxable profits in the year of purchase. For example, if your dental practice buys a new digital X-ray machine for £20,000, you can deduct the full £20,000 from your profits, reducing your corporation tax bill by up to £5,000 (at the current 25% rate) [4].
The allowance is available for expenditure incurred between 1 April 2023 and 31 March 2026, though the government has confirmed it will remain permanently [5]. It replaces the super-deduction which applied from 1 April 2021 to 31 March 2023 [3].
Full Expensing vs Annual Investment Allowance (AIA)
The Annual Investment Allowance (AIA) gives a 100% deduction on qualifying plant and machinery up to £1 million per year [2]. Unlike full expensing, AIA is available to all businesses, including sole traders and partnerships. However, full expensing has no cap and is restricted to companies [1][3]. For a dental limited company, full expensing may be more beneficial for large purchases exceeding the AIA threshold, but you cannot claim both allowances on the same expenditure [1].
What Dental Equipment Qualifies for Full Expensing?
To qualify for full expensing, the asset must be new and unused, not a car, and must be plant and machinery [1][3]. For dentists, typical qualifying assets include:
- Dental chairs and delivery units
- X-ray and imaging equipment (digital radiography, CBCT scanners)
- Sterilisation equipment (autoclaves)
- Computers, monitors, and practice management software (if purchased as part of hardware)
- Dental laboratory equipment (if used in practice)
- Air compressors and suction systems
Assets that do not qualify include cars, second-hand equipment, assets held for leasing, and assets with a useful life of more than 50 years [3][4]. Integral features such as electrical systems, cold water systems, and thermal insulation are also excluded from full expensing and instead qualify for a 50% first-year allowance [4].
How to Claim Full Expensing on Your Tax Return
To claim full expensing, include the qualifying expenditure in your company tax return. You need to calculate the capital allowances due and enter the amount in the relevant box of the CT600 form. It is advisable to keep detailed records of the purchase, including invoices and proof that the asset is new. Your accountant can help ensure the claim is correctly made and that you do not inadvertently claim both AIA and full expensing on the same asset.
If you dispose of an asset on which you claimed full expensing, a balancing charge arises equal to 100% of the proceeds (or 50% for special rate assets) [4]. This means you may need to pay tax on the disposal value, so plan accordingly.
Full Expensing for Limited Companies vs Sole Traders
Full expensing is only available to limited companies [1][3]. Sole traders and partnerships cannot claim full expensing; they must use the Annual Investment Allowance (AIA) or writing down allowances instead. If you are a sole trader using the cash basis, you can only claim capital allowances on business cars [2]. For dentists operating as a limited company, full expensing offers a more generous relief on large capital purchases.
Common Mistakes and How to Avoid Them
- Claiming on second-hand assets: Full expensing only applies to new, unused assets [1]. Buying used equipment means you must use AIA or writing down allowances.
- Claiming on cars: Cars are excluded from full expensing [3]. Separate rules apply for car allowances.
- Claiming both AIA and full expensing on the same asset: You cannot claim both [1]. Choose the most beneficial allowance.
- Forgetting the balancing charge on disposal: When you sell or dispose of the asset, you may face a tax charge [4]. Keep records of disposal proceeds.
- Incorrect classification: Ensure the asset qualifies as plant and machinery. Integral features and long-life assets have different rules [4].
Frequently Asked Questions
Can I claim full expensing on a dental chair? Yes, if it is new and unused and purchased by a limited company.
Is full expensing available for associate dentists? Associates who are sole traders cannot claim full expensing; only limited companies can.
What is the deadline for claiming full expensing? The allowance is currently available until 31 March 2026, but the government has indicated it will be made permanent [5].
Can I claim full expensing on computer software? Only if the software is purchased as part of a hardware package or is considered plant and machinery. Off-the-shelf software may qualify under separate rules.
References
- gov.uk: Claim capital allowances: Full expensing and 50% first-year allowance
- aka.hmrc.gov.uk: Claim capital allowances: Overview - GOV.UK
- icaew.com: A lowdown on full expensing for SMEs - ICAEW.com
- accaglobal.com: Full expensing, exclusions to the claim | ACCA Global
- taxscape.deloitte.com: Deloitte | Capital allowances, permanent full expensing maintained ...