The Annual Investment Allowance (AIA) provides 100% first year tax relief for qualifying expenditure on plant and machinery. It 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. Partnerships or trusts with individuals and companies in the business structure do not qualify for the AIA.
The AIA was permanently set at £200,000 for all qualifying expenditure on or after 1 January 2016. The limit is a generous allowance and should cover the annual capital expenditure spend of many small and medium sized businesses. The allowance 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.
Planning notes
Sole traders should be careful not to claim AIA at a level that would reduce their taxable income below the amount covered by their personal tax allowance.
The timing of a purchase should also be considered to ensure that, where possible, the purchase of qualifying equipment is made in the most tax effective tax year. Please call if you are considering a significant outlay for new equipment and we will help you crunch the numbers.
