AIA which provides 100% tax relief on qualifying Capex has been set at £200,000 from 1st January 2016. This has now been made permanent. Annual Investment Allowance has fluctuated throughout its history. It started at £50,000 in 2008, rose to £100,000, fell again to £25,000 before sharply rising to £250,000 and then £500,000 for the last tax year.
The new permanent limit of £200,000 should fully cover the Capital expenditure of most small firms. Any spending above this limit will attract the normal writing down allowance of 18% for equipment and 8% for fittings and long life assets. Be aware that these HMRC reliefs replace depreciation in your accounts. Tax is calculated by adding back depreciation and then taking off AIA or WDAs to arrive at taxable profit. All investment in business assets is tax exempt over a period of time. AIA just accelerates the relief.
