Be quick – Annual Investment Allowance set to fall

The Annual Investment Allowance (AIA) – the maximum amount of business expenditure that can be fully deducted on qualifying plant and machinery – is due to be reduced from 1 January 2016.

The allowance currently sits at a very generous £500,000. A business effectively gets full relief in the year of acquisition for up to £500,000 of qualifying plant and machinery.

From 1 January 2016, the AIA limit will be reduced to £200,000. This is far greater than the originally planned limit of £25,000, but nonetheless is significantly lower than the current allowance. So that the current AIA can be fully utilised, businesses should look to bring forward plant and machinery purchases to before 31 December 2015; before the AIA limit is reduced.

Don’t put this off until the New Year!

The AIA limit

If the business’s accounting period straddles the date at which the AIA changes (i.e. 1 January 2016), the maximum AIA limit will vary. For example, a company with a 31 March year end will be able to claim up to £425,000 (i.e. 9 months at £500,000 plus 3 months at £50,000) BUT this will be limited to only £50,000 for the period 1 January 2016 to 31 March 2016, i.e. to benefit in full, the £375,000 must be used before 31 December 2015.

Planning points

If cash-flow is tight, there are some potential planning options:

  1. Acquire assets on Hire Purchase
  2. Loans from company pension schemes (where permissible)

Please refer to our recent Tax Bite for more information. For further guidance on the new AIA rules, please get in touch with your usual Forbes Dawson contact.




Sign up for our newsletter

Interested in receiving the latest tax planning ideas?

Sign up to Tax Bites – our weekly update offering practical but effective tax saving tips.

Contact Us

You can use this form to request us to give you a call or if you prefer just leave us a message. Please be sure to leave us a contact number or email address for you and we will get back to you as soon as we can.

0161 927 9277


Fairbank House
Ashley Road
WA14 2DP