Changes to Annual Investment Allowance from January

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Having concluded that a reduction to £25,000 would not be “remotely acceptable”, from 1 January 2016 the chancellor has set the Annual Investment Allowance at £200,000 – “it’s highest permanent level.”

For those businesses whose financial year is not in line with the calendar year transitional rules will apply and the Annual Investment Allowance will be apportioned according to the financial year end.

For example, a business with a 31 March 2016 year end will have an AIA of £425,000; nine twelfths of £500,000 totalling £375,000 plus three twelfths of £200,000 giving £50,000.

However, expenditure incurred from 1 January 2016 up to the accounting year end cannot exceed the proportion of AIA calculated for that period (£50,000). Therefore it you are spending more than £50,000 it may be worthwhile doing so before 1 January 2016, if you want to get relief for the full cost in the year of purchase.

For further information please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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