Budget 2021 breakdown 1: Annual Investment Allowance
Dan Keets, Client Services Adviser

In this first of our Budget 2021 breakdown series of advice blogs, we delve into the updates announced by the Chancellor to the Annual Investment Allowance (AIA).

This is part one, you can also read;

Part Two – Budget 2021 breakdown 2: R&D Tax Relief

In the Autumn Budget 2021, the Chancellor announced that the Annual Investment Allowance available to businesses on qualifying expenditure, would remain at its current level of £1,000,000 until 31 March 2023.

Since 1 January 2019, businesses have been able to claim a 100% deduction on their first £1,000,000 (previously £200,000 from 1 January 2016) of qualifying expenditure against taxable profits of the same period.

The £1,000,000 AIA level was due to permanently drop back down to £200,000 from the 1 January 2022, however the Autumn Budget confirmed that the AIA will, instead, remain at its current £1,000,000 per annum until 31 March 2023.

What is the Annual Investment Allowance (AIA)

Any business purchasing qualifying assets, will usually claim writing down allowances (WDAs) of either 18% or 6% of the cost per annum to claim tax relief for the expenditure.

The AIA is available to claim against qualifying plant and machinery expenditure and allows 100% of the expenditure (up to the relevant annual maximum) to be claimed immediately, therefore accelerating the tax relief and simplifying the overall process.

Qualifying Assets

AIA is available to claim on most plant and machinery (up to the annual maximum) however is specifically not available to claim on cars – instead writing down allowances (18% or 6%) or first year allowances (100%) can be claimed depending on the CO2 emissions.

Next steps

If you have any questions about capital expenditure, or would like further advice on tax planning, please do get in touch and our specialist tax team will be happy to help you.

 

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