Using the Annual Investment Allowance

The Annual Investment Allowance (AIA) is a generous tax relief that was first introduced in 2008. The AIA allows for the total amount of qualifying expenditure on plant and machinery to be deducted from profits before tax.

The AIA can be claimed by an individual, partnership or company carrying on a trade, profession or vocation, a UK non-residential property business or a furnished holiday let. Only partnerships or trusts with a mixture of individuals and companies in the business structure are unable to qualify for AIA.

The AIA was permanently set at £200,000 for all qualifying expenditure on or after 1 January 2016. Following the pandemic, this limit has been temporarily increased to £1 million until 31 March 2023.

The AIA is available for most assets purchased by a business, such as machines and tools, vans, lorries, diggers, office equipment, building fixtures and computers. The AIA does not apply to cars.

A claim for AIA must be made in the period the item was bought. This date is defined as the date when a contract was signed – if payment is due within 4 months of the contract being signed – or the actual payment date if it’s due more than 4 months later.

Companies also have the option to claim the super-deduction for purchases of qualifying equipment up to 31 March 2023. As this relief effectively provides a 130% deduction, this would be a better choice under most circumstances. Unfortunately, this super-deduction is only available to companies. The best choice for the self-employed is the AIA.

Source: HM Revenue & Customs Tue, 02 Aug 2022 00:00:00 +0100

Latest articles

Termination payments

The tax treatment of termination payments has changed significantly over recent years. The changes have aligned the rules for tax and secondary National Insurance contributions (employer (NICs)) by making an employer liable to pay NICs on termination

Bona Vacantia – dissolved companies

The final step in bringing a company to a legal end is dissolution. However, one if the important points to consider when doing so is that the dissolved company can no longer do or receive anything including receive a tax refund. It is the

Reminder of compensation limits for bank deposits

The bank deposit guarantee limit is the amount of money that is guaranteed for savers in UK banks and building societies should the institution become insolvent. The Financial Services Compensation Scheme (FSCS) guaranteed amount is currently £85,000

Reminder that the plug-in grant has ended

The government plug-in grant was first introduced 11 years ago to help drivers make the move to owning an electric car. Since the scheme was introduced the amount of the grant available reduced significantly as did the range of cars to which the