Finance the equipment you need and offset the tax with the AIA increase

27 November 2018

The Annual Investment Allowance (AIA) is increasing from £200k to £1m, giving small-medium businesses the chance to invest in equipment and technology with up to 100% offset against tax on business income.

In our infographic below, we explore what the AIA is, and how you can use Asset Finance to spread the cost of your investments, while also benefiting from the tax relief offered by the government as part of their recent budget announcement.

What is the Annual Investment Allowance?

Introduced in 2008, the Annual Investment Allowance (AIA) allows qualifying expenditure on plant, machinery, integral features of a building and some fixtures and fittings up to the AIA limit to be 100% offset against business income in the year the expenditure occurs.

The commitment to increasing the AIA from £200,000 to £1million is designed to provide extra tax relief to firms who invest in business machinery and equipment. Part of the government’s aim to ‘stimulate business investment’ it is particularly key to industries like yours, with a high investment in large-scale equipment.

How does the AIA work?

For accounting years starting after January 2019 any qualifying spend up to £1million will get 100% tax relief.

If your qualifying spend is £1.2million, then the first £1million qualifies for 100% tax relief, with the additional £200,000 qualifying for 18% tax relief (or 8% for integral building features).

When is the increase in the AIA coming in?

The increased allowance applies to investments in equipment and technology (see other eligible assets here) for a period of two years, beginning on 1st January 2019.

What assets are eligible for AIA?

You can invest in equipment, plant, machinery, integral features of a building and some fixtures and fittings. It also covers some technology equipment and vehicles.

  • Computers and all kids of office furniture and equipment
  • Vans, lorries, trucks, cranes and diggers
  • ‘Integral features’ of a building or structure
  • Other building fixtures, such as shop fittings, kitchen and bathroom fittings
  • All kinds of business machines, such as printing presses, lathes and tooling machines

What assets are ineligible?

Below are some assets that are not eligible.

  • Land
  • Buildings (excluding integral features)
  • Cars
  • Existing or gifted assets

There are also some asset types that are not permitted under the allowance, for example, whilst the AIA applies to hire purchase, it does not cover lease-based assets.

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