Annual Investment Allowance (AIA) £1M Limit Made Permanent

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£1m AIA Super-deduction

The asset investment allowance (  AIA ) was first introduced back in 2008 during the recession and was created to encourage businesses to increase investments in plant and machinery, thus stimulating economic growth.

One of the main incentives of the allowance is that it facilitates faster tax relief since the full expenditure may be claimed in the year of purchase, rather than over a number of years.

The summer budget of 2015 set the permanent level of AIA at £200,000 from 1 Jan 2016, at budget 2018 the level was temporarily increased to £1,000,000 for two years from 1st Jan 2019. At the time of writing (November 2023) the chancellor’s Mini Budget has made the £1,000,000 allowance permanent!

What are the benefits of the asset investment allowance and it being made permanent? 

Companies investing in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance – this upfront super-deduction allows companies to cut their tax bill by up to 25p for every £1 invested, whether it be a new tractor unit, Macs Crane & Hiab truck or even your next builder’s merchant vehicle.

Practical Examples: 

 

EXAMPLE 1: 

£100,000 Asset – You can offset 130% against taxable profit (£130,000)

This equates to a saving of £24,700

EXAMPLE 2: 

£250,000 Asset – You can offset 130% against taxable profit (£325,000)

This equates to a saving of £61,750 

Impact on the buying process

With such fantastic TAX savings to be had, the AIA then presents an interesting dilemma for businesses looking for a new truck, bringing the difference between buying a new vs a used truck into a much smaller window, and in some cases, it may even work out cheaper for the ownership period to opt for the newer vehicle.

Rest assured, our sales team is on hand to talk through the best options for your circumstances and business, whether you are a small one-man operation or a fleet of hundreds! Contact us today.Contact Us

 

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