Annual Investment Allowance
The Annual Investment Allowance (AIA) allows businesses to deduct qualifying expenditure up to the available limit when calculating profits, providing immediate tax relief for the expenditure. The AIA is available to unincorporated businesses and to companies.
The temporary limit of £1 million, which has applied since 1 January 2019, comes to an end on 31 March 2023. From 1 April 2023, it is due to revert to its permanent level of £200,000. Transitional rules apply where an accounting period spans 31 March 2023, and these can operate harshly.
If you are planning significant capital expenditure, please talk to us to ensure you don’t fall foul of the transitional rules.
Companies (not non-Ltd businesses) can claim a super-deduction for most expenditure that qualifies for main rate capital allowances where that expenditure is incurred between 1 April 2021 and 31 March 2023. The main exclusion is expenditure on cars. The super-deduction provides an enhanced deduction of 130% of the expenditure.
If you run your business as a company, time is limited to take advantage of the super-deduction (which provides a better rate of relief than the AIA).
We can help you plan your capital expenditure to make best use of the available reliefs.
50% first-year allowance
Again, companies only can also benefit from a 50% first-year allowance for qualifying expenditure incurred in the period from 1 April 2021 to 31 March 2023 which would otherwise qualify for special rate writing down allowances of 6%.
The allowance is only beneficial where the AIA limit has been used up.