The Annual Investment Allowance (AIA) will be increased from £200,000 to £1 million under plans to boost investment in the UK, the Chancellor revealed in this week’s Autumn Budget.
The measure, which is timetabled to last for two years, lets a business deduct qualifying expenditure, such as plant and machinery, from its taxable profits, providing significant tax benefits and increased opportunity to grow.
Under current legislation, most businesses are able to claim AIA in respect of their expenditure on both main rate and ‘special rate’ plant and machinery, with the main exception being expenditure on cars.
The change increases the maximum 100 per cent upfront allowance that applies to qualifying expenditure to £1 million in any given tax year, beginning 1 January 2019 for a period of two years.
The Chancellor said he has increased the AIA based on a longstanding ask of the British Chambers of Commerce (BCC).
Reacting to the announcement, Dr Adam Marshall, Director General of the BCC, said: “In an atmosphere of unprecedented uncertainty and heightened political noise, the Chancellor has demonstrated that he is listening to business concerns by delivering a Budget that supports investment and growth.
“We are delighted that the Chancellor has listened to the voice of Chambers of Commerce and has boosted the Annual Investment Allowance to £1million. This will be a huge shot in the arm for businesses across the country, giving many thousands of firms renewed confidence to invest and grow.”
The measure forms part of a package to stimulate growth in the UK, which also includes targeted relief for acquiring intellectual property-rich businesses, as well as plans to allow businesses to deduct two per cent of the cost of any new non-residential structures and building off their profits before they pay tax.