Annual Investment Allowance: helping businesses grow
The Annual Investment Allowance has risen to £1m from January 2019 and is fixed until the end of 2020. This is a significant boost to businesses looking to invest in capital equipment over the next two years.
What is the Annual Investment Allowance?
The Annual Investment Allowance (AIA) lets the business deduct the cost of certain assets from their taxable profits. This means, in theory, that companies can deduct up to £1m from their taxable profits, saving a substantial amount of money as long as they have invested the money in qualifying expenditure.
You can claim AIA on most assets purchased for use by businesses. It also applies to hire purchase, although not lease-based assets.
Qualifying expenditure covers most purchases of plant and machinery including building parts and fixtures, some vehicles (though not cars for private use), heating systems, lifts, air conditioning, lighting systems and specialist equipment integral to running your business.
Items must be bought and owned, not rented or gifted to you, and if you end up selling an item that benefited from AIA, then you may have to pay tax subsequently.