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What is the annual investment allowance? | Tax relief on business assets in 2024

What is the annual investment allowance? | Tax relief on business assets in 2024

Jonathan Green

What is the annual investment allowance
The Annual Investment Allowance (AIA) is a generous tax relief that allows for the total amount of qualifying expenditure on plant and machinery business assets to be deducted from your profits before tax. It’s important to note that if you purchase a new business asset and claim the AIA relief and later decide to sell this item you will be liable to tax on any gain on the asset.

How can AIA on business assets claimed
The AIA can be claimed by an individual, partnership or company carrying on a trade, profession or vocation, a UK non-residential property business or a furnished holiday let. Only partnerships or trusts with a mixture of individuals and companies in the business structure are unable to qualify for Annual Investment Allowance. The AIA tax relief is currently available for qualifying expenditure of up to £1 million per year.

Can I reduce my tax bill by incurring expenditure on large items.
The timing of the expenditure determines which tax year any AIA claim falls into. The tax benefits are likely to be a secondary concern to having the asset for operational needs but if there is some flexibility in when it is required the timing of purchase could impact tax liabilities. This could mean looking at accelerating plans, where possible, to incur expenditure before the end of the year and maximise tax relief.

What business assets are eligible for AIA
The AIA is available for most business assets purchased by a business, for example, machines and tools, vans, lorries, diggers, office equipment, some building fixtures and computers. The AIA tax relief does not apply to cars.
A claim for AIA must be made in the period the item was purchased. This date is defined as the date when a contract was signed - if payment is due within less than 4 months of the contract being signed – or the actual payment date if it’s due more than 4 months later.

Contact us
If you’re in the process of investing in your business with the purchase of business assets. make the most of the Annual Investment Allowance, contact our specialist tax team that can advise you on the best way to use this allowance.