The Annual Investment Allowance (AIA) provides a tax write off against profits for expenditure incurred on plant and machinery (not cars) for most businesses and owners of commercial property.
In the Autumn Statement 2012, the Chancellor announced a temporary increase in the amount of AIA available from £25,000 to £250,000. Budget 2014 further increases the amount of the AIA to £500,000 but it is still described as a temporary increase. This means that the AIA will revert to £25,000 and so capital expenditure plans should take this eventuality into account.
Changes to the AIA – key dates
The maximum AIA was increased to £250,000 for expenditure incurred on or after 1 January 2013. This temporary increase was originally due to end by 1 January 2015.
The amount of the AIA is further increased to £500,000 from 1 April 2014 for companies or 6 April 2014 for unincorporated businesses until 31 December 2015.
What happens in 2015 and onwards?
The AIA remains at the high level of £500,000 for the 12 months to 31 December 2015. Then on 1 January 2016, the AIA reverts back down to £25,000.
What do I do?
The increase in AIA is positive for businesses but the increase is a temporary measure. There are other restrictions which can affect the availability and use of the AIA so careful planning may be required to ensure that capital allowances are maximised.
If you would like to discuss these changes, please do get in touch.