Annual Investment Allowance

Tenfold increase in annual investment allowance

One of the biggest surprises in the Chancellor’s “Autumn Statement” delivered on 5th December 2012 was the tenfold increase in the level of annual investment allowance from £25,000 to £250,000.

Unusually for a tax change, the new threshold applies from 1st January 2013 rather than from April and will drop back to £25,000 from January 2015.

Annual investment allowances were introduced from April 2008 to give a 100% deduction against taxable profits for the cost of purchasing equipment. The thresholds have changed several times since 2008 which can make the calculation of the correct amount available very complex. However, to take the simplest case, a business with an accounting year ended 31st December 2013 will be able to get a 100% deduction for up to £250,000 worth of new equipment bought during that year.