Changes to the VAT Capital Goods Scheme
Published 30 July 2026
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This publication is available at https://www.gov.uk/government/publications/revenue-and-customs-brief-7-2026-changes-to-the-vat-capital-goods-scheme/changes-to-the-vat-capital-goods-scheme
Purpose of this brief
This brief explains the changes made to the items covered by the Capital Goods Scheme.
The changes will take effect from 29 July 2026.
Who should read this brief
Businesses or other taxable persons that incur capital expenditure on land, buildings or civil engineering works.
Businesses, charities or organisations who make a mix of taxable, exempt and non-business supplies.
Tax advisers.
Background
You must recover VAT on some capital assets using the Capital Goods Scheme. The scheme requires you to adjust the VAT you originally claimed if the business use or taxable use of the asset changes over time.
Before 29 July 2026, the Capital Goods Scheme applied to:
- land, buildings and civil engineering works where capital expenditure was £250,000 or more, excluding VAT
- computers and computer equipment where capital expenditure was £50,000 or more, excluding VAT
- aircraft, ships, boats and other vessels where capital expenditure was £50,000 or more, excluding VAT
On 28 April 2025, on the Tax Update: Simplification, Administration and Reform Day, the government announced changes to simplify the Capital Goods Scheme.
The changes:
- remove computers and computer equipment from the scheme
- increase the capital expenditure threshold for land, buildings and civil engineering works from £250,000 to £600,000, excluding VAT
These changes aim to reduce the administrative burden on small businesses.
The government introduced these changes through secondary legislation. They took effect on 29 July 2026.
Changes to the Capital Goods Scheme
From 29 July 2026:
- computers and computer equipment are no longer covered by the Capital Goods Scheme
- the capital expenditure threshold for land, buildings and civil engineering works has increased from £250,000 to £600,000, excluding VAT — the Capital Goods Scheme now only applies to these assets if the capital expenditure is £600,000 or more
The Capital Goods Scheme rules for aircraft, ships, boats and other vessels have not changed.
Application of the changes
If a capital item already falls within the Capital Goods Scheme under the threshold that applied before 29 July 2026, it will stay in the scheme until the end of its adjustment period.
You must continue to make any Capital Goods Scheme adjustments for these capital items, even if the first adjustment period starts on or after 29 July 2026.
The new £600,000 threshold applies to land acquired on or after 29 July 2026, and to buildings and civil engineering works acquired, constructed, refurbished, fitted out, altered or extended on or after that date.
Computers and computer equipment that you acquire on or after 29 July 2026 are no longer covered by the Capital Goods Scheme. You do not need to make Capital Goods Scheme adjustments for these assets.
More information
HMRC guidance will be updated to reflect these changes.