On 29 July 2026, two things happen to the VAT Capital Goods Scheme. Computers leave it entirely, and the threshold for land and buildings jumps from £250,000 to £600,000. Plenty of businesses will read that, decide the scheme no longer applies to them, and quietly stop doing their interval adjustments. That would be a mistake. The assets you already own don't move across to the new rules.
TL;DR: From 29 July 2026, the VAT Capital Goods Scheme stops applying to computers, and only catches land, buildings and civil engineering works costing £600,000 or more excluding VAT. Assets you bought before that date stay under the old rules and must still be adjusted. Ships and aircraft are unchanged at £50,000.
What Changes on 29 July 2026?
Two changes, both made by the Value Added Tax (Amendment) Regulations 2026, SI 2026/765. Computers and computer equipment are removed from the list of capital items altogether. And the capital expenditure threshold for land, buildings and civil engineering works rises from £250,000 to £600,000, excluding VAT (SI 2026/765, 2026).
Until 28 July, the scheme catches any single computer costing £50,000 or more excluding VAT, and any land, building or civil engineering work costing £250,000 or more (VAT Notice 706/2, 2026). Refurbishments, fit-outs, extensions and annexes count too, provided the spend is capitalised.
The government's stated aim is to "simplify the administration of the VAT system and to reduce the administrative burden on small businesses who have been subject to complex and time-consuming CGS calculations" (ICAEW, 2026). The change was confirmed at Tax Update 2026 on 23 June, after a call for evidence that ran back in 2019.
Existing Assets Keep the Old Rules
This is the part that gets missed. The new rules only bite on capital expenditure incurred on or after 29 July 2026. Regulation 1(3) of SI 2026/765 carves out any capital item where the qualifying expenditure was incurred before that date, for goods or services supplied before it, or for goods imported or acquired before it.
So if you bought a £300,000 warehouse in 2023, it's inside the scheme with a ten-interval adjustment period, and it stays there until that period runs out. The threshold going up to £600,000 does nothing for it. Same with a £60,000 server bought last year: it keeps its five-interval life and you keep adjusting it.
One question clients always ask when a threshold moves is whether it applies retrospectively. It almost never does, and it doesn't here. The scheme you were in on the day you spent the money is the scheme you stay in.
Who Does the Capital Goods Scheme Actually Affect?
If you recover all your input VAT, the scheme is mostly a record-keeping exercise with a nil result. It bites when the proportion of your taxable use changes over time, which happens if you're partly exempt or have some non-business use.
That means it matters most to property investors and landlords, financial services firms, insurance brokers, education providers, healthcare businesses, and charities with a mix of business and non-business activity. What we see most often is a partly exempt business that capitalised a large fit-out, never set up an interval schedule, and only discovers the problem when an adjustment is queried years later.
The scheme runs for ten intervals on land and buildings, and five intervals on computers, ships and aircraft (VAT Notice 706/2, 2026). Each interval you compare taxable use against the original recovery and adjust up or down.
What Stays in the Scheme After 29 July?
Land, buildings and civil engineering works at £600,000 or more, and ships, boats and aircraft at £50,000 or more. The £50,000 figure for vessels and aircraft is untouched by these regulations, and so is its five-interval adjustment period.
Civil engineering work keeps its everyday meaning, so roads, bridges, and installing pipework for mains connections all count. Capitalised refurbishment and fit-out spend on a building still counts too, and it's measured against the same £600,000 threshold once the new rules apply.
Computer software was never in the scheme, and neither was a network taken as a whole. The old rule looked at a single item of equipment costing £50,000 or more, which in practice caught very few businesses. Removing it is the smaller of the two changes.
Should You Time Your Property Spend Around the Date?
If you're partly exempt and about to commit to property spend between £250,000 and £600,000, the date the expenditure is incurred decides which regime you land in. It's worth a conversation, because the answer isn't automatically "wait".
Take a £400,000 building with £80,000 of VAT on it. Incur that spend on 28 July and you're in the scheme: £80,000 spread over ten intervals is £8,000 a year of adjustment exposure, up or down. Incur it on 30 July and you're outside the scheme, and your initial recovery percentage is locked for good.
Being outside sounds better until your taxable use rises. A business expecting exempt activity to fall away would have clawed back more VAT under the scheme. When we reviewed a client's books after a change of use, the adjustments over the remaining intervals were worth more than the compliance cost of running them. Simplification cuts both ways, and which side you want to be on depends on where your recovery rate is heading. Our VAT and tax advisory team can model both.
Frequently Asked Questions
Do I have to keep adjusting a computer I already own?
Yes. If you incurred the expenditure before 29 July 2026, regulation 1(3) of SI 2026/765 keeps it under the old rules. Carry on through its five intervals as normal. Only computers bought on or after 29 July fall outside the scheme.
Does the £600,000 threshold include VAT?
No. It's £600,000 or more of capital expenditure excluding VAT, the same basis as the old £250,000 test.
Are ships and aircraft still caught?
Yes, and nothing changes for them. Aircraft, ships, boats and other vessels stay in the scheme at £50,000 or more excluding VAT, with a five-interval adjustment period.
My building cost £400,000. Am I in or out?
It depends entirely on when you incurred the expenditure. Before 29 July 2026, you're in the scheme for ten intervals. On or after that date, £400,000 is below the new £600,000 threshold and the scheme doesn't apply.
Does this change anything if my business is fully taxable?
In practice, very little. You recover the VAT in full and each interval adjustment comes out at nil. The scheme matters when your recovery rate moves, which is a partial exemption and non-business use issue. Our guide to UK quarterly VAT returns covers the routine filing side.
If you hold property, a fit-out, or equipment that went through the Capital Goods Scheme, the fortnight before 29 July is a sensible moment to check which of your assets are grandfathered and which future spend now falls outside. Get in touch and we'll review your capital items, confirm the intervals still running, and tell you whether timing your next property spend either side of the date is worth anything to you. If you're also reviewing capital spend for direct tax, our notes on capital allowances, year-end accounts and the furnished holiday lets changes are a good place to start.