What is Annual Investment Allowance?

What is Annual Investment Allowance?

The Annual Investment Allowance (AIA) in the UK permits businesses to fully deduct (100%) the cost of qualifying plant and machinery investments, up to a threshold of £1,000,000, from their taxable profits in the tax year of purchase.

This allowance does not extend to car purchases (excluding lorries, van or truck).  It is designed to encourage business growth by facilitating investments in new equipment ranging from computer systems to office furniture and various vehicles, excluding cars. The AIA is applicable to a wide range of business structures, including sole traders, partnerships, and limited companies, offering 100% tax relief on eligible expenditures annually.

This allowance is not restricted to incorporated entities, allowing a broad spectrum of businesses to benefit. The AIA refreshes each year, enabling continuous investment and offering the potential for significant tax savings and enhanced cash flow. By combining the AIA with the Writing Down Allowance (WDA), businesses can optimise their tax savings. This strategy can liberate funds otherwise allocated for tax payments to HMRC, thus improving cash flow.

If there's any uncertainty regarding the eligibility of your assets, or if you have further inquiries about these tax schemes, give us a call.

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