Annual Investment Allowance Update
There was welcome news in the recent budget that the allowance would remain at £1,000,000 until 31 March 2023. Why is this such good news? The Annual Investment Allowance gives 100% tax relief on qualifying expenditure in plant and machinery and integral features, meaning the cost of the assets purchased in the year can be deducted in full from the taxable profit.
This provides an incentive to invest where it is necessary, to improve business function, and ensure assets are efficient and up-to-date with latest technologies and developments, whilst also reducing the profits of the business subject to tax.
What is Annual Investment Allowance (AIA)?
When a business buys capital equipment the cost is deducted from the accounts over several financial years as depreciation. However, depreciation is not deductible when calculating the business’s taxable profits. Instead the business may get tax relief on certain capital expenditure through capital allowances for plant and machinery.
