Using the Annual Investment Allowance
The Annual Investment Allowance (AIA) is a generous tax relief that was first introduced in 2008. The AIA allows for the total amount of qualifying expenditure on plant and machinery to be deducted from profits before tax.
The AIA can be claimed by an individual, partnership or company carrying on a trade, profession or vocation, a UK non-residential property business or a furnished holiday let. Only partnerships or trusts with a mixture of individuals and companies in the business structure are unable to qualify for AIA.
The AIA was permanently set at £200,000 for all qualifying expenditure on or after 1 January 2016. Following the pandemic, this limit has been temporarily increased to £1 million until 31 March 2023.
The AIA is available for most assets purchased by a business, such as machines and tools, vans, lorries, diggers, office equipment, building fixtures and computers. The AIA does not apply to cars.
A claim for AIA must be made in the period the item was bought. This date is defined as the date when a contract was signed - if payment is due within 4 months of the contract being signed – or the actual payment date if it’s due more than 4 months later.
Companies also have the option to claim the super-deduction for purchases of qualifying equipment up to 31 March 2023. As this relief effectively provides a 130% deduction, this would be a better choice under most circumstances. Unfortunately, this super-deduction is only available to companies. The best choice for the self-employed is the AIA.
Newsletter
With our newsletter, you automatically receive our latest news per e-mail and get access to the archive including advanced search options!
Latest news
- Do you have additional income streams?
03/07/2025 - More...
Side income over £1,000 may mean filing a tax return. HMRC is urging part-time earners to check their tax position for
- Setting up a payroll scheme
03/07/2025 - More...
Registering for payroll is essential when hiring staff. From HMRC registration to legal compliance, getting payroll
- What if you no longer need to submit a tax return
03/07/2025 - More...
You must tell HMRC if you no longer need to file a tax return. Whether you have stopped trading or no longer rent out