Most corporate and unincorporated businesses are able to utilise a £200,000 annual investment allowance (AIA) to claim 100% tax relief on their qualifying expenditure on plant and machinery. The allowance was temporarily increased to £1 million for expenditure incurred on or after 1 January 2019 and was due to revert back to £200,000from 1 January 2022.
The £1 million allowance will now be retained until 31 March 2023.
Transitional rules will apply to accounting periods that span 1 April 2023.
For companies, this aligns the end of the temporary AIA with the end of the ‘super-deductions’ as announced by the government in Spring Budget 2021.
A reminder of super-deductions
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery are able to benefit from new capital allowances, termed‘super-deductions’ or ‘first year allowances’, as follows:
- a super-deduction of 130% can be claimed on most new plant and machinery investments that ordinarily qualify for the 18% main rate writing down allowances
- a first year allowance of 50% can be claimed on most new plant and machinery investments that ordinarily qualify for the 6% special rate writing down
These reliefs are not available for unincorporated businesses.
The full Bryden Johnson budget summary is available here.