The Annual Investment Allowance (AIA) allows full tax relief in the year of investment on qualifying capital expenditure that may have otherwise received relief at 6% or 18% per annum.

From 1 January 2019 the annual limit for the Annual Investment Allowance was increased from £200,000 to £1,000,000. The increased limit was intended to be temporary until 31 December 2020, when it would revert to £200,000.

In November 2020, following our Autumn/Winter newsletter, the government announced that the increased annual limit of £1,000,000 would remain until 1 January 2022.

This increased Annual Investment Allowance gives business owners encouragement to invest in their plant and machinery whilst the increased limit still applies to maximise the 100% tax relief that may be restricted in future years.

Rosie covers the importance of this relief in her year-end tax planning article, and it is worth bearing in mind if you are planning large capital expenditure in the coming year.