£1million Annual Investment Allowance (AIA) to be extended

The Treasury has recently announced that the £1million cap on Annual Investment Allowance claims is to be extended until 1 January 2022. As set out in our Autumn Newsletter, the cap was due to drop to £200,000 from 1 January 2021.

Businesses can therefore continue to benefit from 100% tax relief for qualifying expenditure, such as tractors, in the year on purchases of up to £1million, instead of £200,000. The same amount of relief, in the form of writing down allowances, is still available on any qualifying expenditure in excess of the AIA limit, but is spread over several years.

This move is intended to give businesses the boost they need to weather the pandemic and plan for the future. It is hoped that the extension will provide businesses with confidence to invest into next year, helping them to grow whilst also benefitting the wider economy.

This is an important point to consider if you are planning any major capital expenditure in the near future. If you would like any further advice then please do not hesitate to contact us.

Written by Louise Heywood ACCA

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