Reduction in the Annual Investment Allowance

Last week saw the reduction in the Annual Investment Allowance from £100,000 per annum to £25,000 come into force. This applies to all businesses incurring expenditure on plant and machinery. The change applies from 1 April for businesses subject to Corporation Tax and from 6 April for those paying Income Tax.

For businesses where the AIA covers all of their capital expenditure then the need to calculate capital allowances is removed. Instead businesses are able to claim full tax relief on the amounts they spend on plant and machinery within that limit. Above that limit capital allowances can be claimed.

As welcome as that is, it is disappointing that the £25,000 limit has not been set at a higher level.