Taxation

Autumn Budget 2018 Annual Investment Allowance

Autumn Budget 2018 Annual Investment Allowance

The Autumn Budget in 2018 confirmed the following changes to the annual investment allowance:

Annual Investment Allowance – what is it?

The annual investment allowance is a tax relief for the purchase of assets such as plant and machinery. When certain qualifying expenditure is purchased the amount can be set off against the company profits thus reducing the tax liability.

Annual Investment Allowance current rates

The current annual investment allowance is £200,000.

Any qualifying expenditure over £200,000 is not lost. Instead tax relief can be received in future years through capital allowances. But this can take years to get back the full tax relief. Therefore there is no incentive for businesses to invest in excess of £200,000 on qualifying assets.

Annual Investment Allowance budget changes

To incentivise business investment in assets which will stimulate the economy the government announced that the annual investment allowance will increase to £1 million from 1 January 2019.

This is a temporary measure and will cease on 31 December 2020. From 2021 it will reduce back down to £200,000.

Businesses which are considering investing in assets in excess of £200,000 should consider waiting until 2019. It is also important to bear in mind that the allowances are time apportioned to the company accounting year end. For example a business which spends £1 million on assets in the month of January 2019 but has a February 2019 year end will only receive a portion of the annual investment allowance. In this example they would need to consider delaying the asset purchase until March 2019 when a full years allowance of £1 million would be available.

Return to the Autumn Budget 2018 Overview

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