Annual Investment Allowance – What is it?
The Annual Investment Allowance (AIA) is a £1 million limit that businesses can utilise to deduct the full value of a qualifying item against taxable profits.
What does this mean for my business?
It means that you can offset significant costs against your profits.
Here’s an example:
Your business is on track to make a profit of £250k, which means your corporation tax bill will be £47.5k (at the current rate of 19%)
You decide to purchase qualifying equipment for £50k.
This means that you would only pay corporation tax on £200k, which means reducing your tax liability by £9,500.
It’s a sensible, cost effective way of investing in your business and renewing your assets. And, you can still finance equipment and reap the benefits of the allowance.
Not all assets are eligible for the AIA, so it’s important to check beforehand if what you’re purchasing can qualify.
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