Annual investment allowance

The Annual Investment Allowance (AIA) provides a 100% tax write off for the cost of most plant and machinery acquired by businesses, a notable exception being motor cars.

In Budget 2014 the Chancellor announced that the allowance would be increased to £500,000 for expenditure incurred between 1^st April 2014 and 31^st December 2015 (from 6^th April 2014 for unincorporated businesses). From 1^st January 2016, it is due to plummet to just £25,000.

In this year’s Budget, we had high hopes that the Chancellor might pledge to extend how long the AIA stands at £500,000. Unfortunately, he made no such announcement and only said that the AIA should be reviewed as part of the Autumn Statement. Given that we could see a change of government in the meantime, it would be prudent to assume that the AIA will fall to £25,000 come next year.

There is lots to consider when investing in plant, machinery and vehicles in terms of ownership, finance, VAT and tax relief. Discussing your plans ahead of the purchase, should ensure that you’re fully-aware of the tax position and that we can look for the optimum solution. Please get in touch with your local TaxAssist Accountant if you would like to discuss this further. 

Date published 27 Mar 2015

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.