AIA gets a boost
Annual allowance. A tax deduction for the cost of machinery and equipment of up to £200,000 per year is allowed for the accounting period in which the expense was incurred (rather than under the normal rules being spread over many years). Where the accounting period in which you purchase the machinery etc. is more or less than a year, the annual investment allowance (AIA) is proportionately reduced or increased.
Temporary increase. The Chancellor announced a temporary increase in the AIA to £1 million from 1 January 2019. It will revert to £200,000 on 1 January 2021. Transitional calculations are needed for each change if your business accounting period straddles the dates it applies from (see The next step ). You won’t need to make these calculations if the expenditure on machinery etc. is no more than £200,000 or the pro rata amount if the accounting period is more or less than a year.
Tip. For most businesses the existing £200,000 AIA is more than enough. However, if you’re considering replacing or acquiring more costly equipment January 2019 and 2021 is the time to do it.
For an explanation of the transitional calculation, visit http://tipsandadvice-business.co.uk/download (CD 20.05.08).
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