On 1st January 2019, the Annual Investment Allowance (AIA) was substantially increased from £200,000 to £1m for two years, until 31st December 2020. Read on for our suggestions on how businesses can plan ahead in order to reap the benefits of the temporary increase to the allowance.
Annual Investment Allowance rocketed from £200,000 to £1m from 1st January 2019. It is, however, due to drop back down to just £200,000 on 1st January 2021. The coming months, therefore, represent an excellent opportunity to make the most of the increased allowance.
Caution must be taken when planning expenditure as some businesses may find that the full £1m limit is not in fact available in full where their accounting period straddles the 1st January 2019 or 31st December 2020 due to the application of HMRC’s transitional provisions.
Our Senior Manager Lee Morton explains: “The AIA increase brings with it the opportunity for significant tax savings and, for businesses looking to make substantial investment in new equipment, the coming months represent an important window of opportunity to make use of this generous increase.
“However, the timing of investment is crucial where your accounting period straddles the 1st January 2019 or the 31st December 2020, as the allowance may be subject to a cap in accordance with the transitional provisions.
“Due to the complexities in calculating the allowances available to each business, we recommend that you seek accountancy advice prior to incurring any such expenditure.”